Editor’s note: Though experts are divided over what the next 90 days may bring for the housing market as a whole, they all agree on one point: Each region of the nation has its own unique set of circumstances, and how those factors shape the attitudes of home buyers and sellers over the next several weeks will also help to decide how local home sales and prices will fare through the rest of this year and beyond. This four-part series looks at regional trends that are emerging as the peak spring home-buying season gets under way. (See Part 1.)
Only a few months ago, at midnight on Dec. 31, Joseph and Kianna Jackson gently clicked their champagne glasses together in their New Jersey apartment and made a resolution for the coming year: They vowed to make an offer on their first home by March 15 — their daughter’s second birthday.
But like so many other New Year’s resolutions, their promise has so far been unkept. As mortgage rates crept higher in the first two months of 2006 and sales in their local market slowed, the Jacksons decided to postpone their home-buying plans because they think prices could be a lot lower in the summer or fall than they are today.
“A year ago, the market was super-hot and it was hard to find a Realtor or builder who would even return our calls,” says Joseph Jackson, a self-employed computer-programmer.
“But now, I’m getting a couple of calls a week from people who want to sell me a home,” Jackson says. “I just tell them to call back in a few months, and I’ll let them know whether I’m interested in buying again.”
While real estate agents from Brooklyn to Boston say that the Northeast’s housing market will remain strong, it’s the decisions made by families like the Jacksons that will ultimately determine whether the region’s sales and prices gains simply moderate or come to a screeching halt.
Agents in the area are still cheering a report issued by the National Association of Realtors in March that says February home-resales across the Northeast surged 19 percent above year-earlier levels — the strongest sales gain in the nation.
But skeptics note that sales in the same area had dropped in each of the previous five months. And when NAR released the figures a few weeks ago, the trade group’s own economists acknowledged that the big sales gain was partly fueled by deals that were struck in an unusually warm January and were settled in what became a bitterly cold February.
Still, many prospective buyers in the Northeast today are being lured away from their furnaces by a sharp increase in the number of homes for sale and a gradual softening in sellers’ asking prices.
With inventories nearing 10-year highs in some Northeastern markets, “buyers are reclaiming some of the bargaining power that they had lost as prices soared over the past several years,” says Lawrence Yun, an NAR economist and managing director.
Though Yun expects sales in the region to decline about 5 percent this year, he’s also forecasting a roughly 6 percent gain in the area’s overall median price.
“The most softness in values will be felt in the priciest markets, like Boston and New York City,” the economist adds. “Those are the areas most at risk from rising interest rates — their prices are already so high that a lot of buyers who could qualify for a mortgage at 6 percent won’t be able to qualify as rates move toward 7 percent later in the year.”
As price gains cool, a handful of Northeastern markets have found themselves at the top of some dubious lists.
California-based research firm RealtyTrac recently reported that foreclosures in pricey Connecticut had leapt tenfold from a year ago, by far the biggest increase in the nation.
Earlier, Boston was named the “riskiest housing market in the U.S.” in a research report prepared for Kiplinger’s Personal Finance magazine: The study said there’s a 53 percent chance that values in the city would fall either this year or next.
Further proof that many Northeast markets are shifting came in a conference call that publicly held Cendant Corp. — the New York-based parent of realty giants Century 21 and Coldwell Banker — placed with Wall Street analysts and business writers just a few weeks ago.
In the call, Cendant execs said that its company-owned real estate offices in New England (as well as Florida and Southern California) had seen a staggering 30 percent sales-cancellation rate in December.
Cendant placed most of the blame for the cancelled purchases on short-term speculators, though analysts agreed that many deals were killed by “move-up” buyers who suddenly decided that it would be wiser to keep their current homes rather than get a bigger mortgage to buy a nicer place that could soon drop in value.
The softness in the Northeast’s resale side is also being felt by builders of newly constructed homes, especially now that the steady rise in interest rates has knocked many first-time buyers out of the market because they can no longer qualify for a mortgage.
Northeast building giant Toll Brothers Inc. recently announced that its orders for new homes plunged 29 percent in its fiscal first quarter ended Jan. 31: To stimulate sales, the company is offering free upgrades at many of its projects and has even slashed asking prices at a few.
And at a home builders conference in late February, CEO Chad Dreier of development giant Ryland Group Inc. said his company’s sales in some East Coast markets during January and February were down sharply from year-earlier levels.
Like many real estate analysts, Dreier said it was “too early to tell” whether the recent slowdown in sales represented a mere pause in housing’s long run-up or the start of a long-term decline.
“The year,” said Dreier, “is going to depend on what we sell from March to July.”
Tomorrow: Get the scoop on Florida’s real estate market.
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