Editor’s note: Experts have predicted that the torrid pace of home sales and double-digit price growth would slow this year, and some segments are already experiencing this. In this three-part report we take the housing market’s latest pulse to get a feel for what’s happening across the country and what real estate executives advise brokers and agents can do to stay on top. (See Part 1 and Part 3.)
Dustin and Rebecca Snook believe they could have listed their North Las Vegas home for more, but considering softening conditions, were prepared to compromise. The decision appears to be paying off.
After about only a month on the market, Dustin Snook said they received a full offer on their approximately 2,500-square-foot home, listed at $475,000. “We thought we should probably go for $75,000 more, but we bargained out what could be accomplished with the listing price. We had to go with a price that was reasonable for the time,” said Dustin Snook, 34, who is self-employed.
That makes sense, considering National Association of Realtors senior forecast economist Lawrence Yun said that there are roughly 30 percent more homes for sale on the market now than this time last year. He attributes the slower demand primarily to rising interest rates and to those putting homes they own for investment purposes on the market to diversify away from real estate.
According to the NAR, total existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 2.8 percent to a seasonally adjusted annual rate of 6.56 million units in January from an upwardly revised pace of 6.75 million in December. Sales were 5.2 percent below the 6.92 million-unit level in January 2005.
While Yun expects the higher volume of inventory to continue through the year, he adds: “The shift in these markets is just moving away from the frenzied pace of 2005 and into a more healthy level of activity. Home buyers now have more choices. In 2005, because of multiple bidding, people were buying homes without inspections; it was hectic. While there is an inventory rise, it’s within normal historic range.”
In any event, many parts of the country are experiencing higher inventories. While noting the market there had been going at a torrid pace the past few years, Joan Psarros, an agent with the RE/MAX Realty Team in Cape Coral, Fla., said activity lately has been less than robust.
“We’ve been going gang busters for the last four years, and now people are buying only when it’s price correct,” said Psarros, noting the market starts to cool on homes priced over $1 million. “Homes used to sell right away and prices were going up monthly. Now sellers are getting their home ready for the market and are pricing them based on what the market will bear.”
Likewise, Allyson Hoffman, an agent with RE/MAX North, in Northbrook, Ill., said she is “definitely seeing a trend in growing inventory, longer marketing times and more price reductions.” Hoffman attributes these conditions “to the general softening of the economy coupled with the higher trending (interest) rate push.”
The Las Vegas market, meanwhile, is reported to be “stabilizing” by Linda Rheinberger, president of the Greater Las Vegas Association of Realtors. She acknowledged current conditions are a “re-education” for many home sellers accustomed to a more aggressive market. In terms of pricing, she noted sellers must be realistic. “You have to look at the market and at your competition and position your home accordingly.”
In California, while she said the market hasn’t rebounded as strongly as last year, Donna Baker, an agent with Dickson Podley Realtors in Monrovia, believes it’s gathering steam. “I saw a slow down in the market starting in late October of last year, but I think it’s starting to pick up. It happened the same way the previous year: things seemed to go to sleep in October and in January, and it picked back up. This year, that didn’t happen until now. It was a little sluggish.”
She believes one reason is the uncertainty created by the resignation of Federal Reserve chairman Alan Greenspan. “People were afraid things were going to go crazy and didn’t make any moves. I’m sure things will come back, but I don’t think prices will skyrocket like before. I don’t think sellers have gone away; they’ve just gotten a kick of reality.”
Indeed, with home prices in California projected to rise about 10 percent in 2006, compared with 16 percent a year ago, Robert Kleinhenz, deputy chief economist for the California Association of Realtors, said sellers must heed the market when pricing their home. But that doesn’t mean the balance has tilted in favor of buyers, he added. “We’re in a market with a higher inventory level than a year ago and much higher than two years ago but it’s still lean enough to continue to drive price appreciation.”
At the same time, Yun said the NAR expects new-home construction to drive downward – by roughly 10 percent in 2006 to around 1.9 million, compared with 2.1 million housing starts in 2005. “The decline isn’t insignificant, but it’s not real significant. Historically, 1.9 million is on the higher end. The housing market was moving at about 80 mph, now it’s slowing to 65 mph, which is a good speed.”
For their own good, Dustin Snook and his wife knew they had to consider the big picture. “I guarantee, if we listed for $75,000 more, we probably would have sat quite some time.”
What’s your opinion? Send your Letter to the Editor to firstname.lastname@example.org.