The harvested sustainable bamboo floor of the one-bedroom, one-and-a-half-bath, Emeryville, Calif., condominium gleams in the light pouring in through the west-facing window of a unit whose price has been reduced from almost $700,000 to $599,000.
“The price has been lowered on this unit,” acknowledged Justin Tamblyn, a sales agent at 62-unit GreenCity Lofts. Only 11 of the 62 lofts have closed escrow since they went on sale in late 2005, he said.
“I’ve seen the market slow recently,” said LaToya Faulkner, who toured the development Saturday with Robert Clayton. The couple, both Oakland, Calif., residents, are looking to buy a house, but “we are taking our time,” Faulkner said.
“Prices will drop a little bit in the next six months because interest rates will go up in order to contain inflation as gas and other prices rise,” Faulkner said. Until then, the two are scoping out the scene and standing pat, she said.
Reports of price reductions like those at GreenCity Lofts – though not necessarily as dramatic – and cautious buyers taking their time are growing all over the country, especially in areas like Northern California where price gains were dramatic for so long.
The national rate of home sales dropped 2.1 percent in the first quarter of 2005, the National Association of Realtors trade group reported this month. The latest report on total existing-home sales shows that the seasonally adjusted annual rate was 6.8 million units in the first quarter, down 2.1 percent from the 6.94 million-unit level in the first quarter of 2005.
“Existing-home sales, including single-family and condo, remained historically high in the first quarter but have experienced a downtrend since hitting a record in the third quarter of last year,” NAR said.
Though the overall U.S. real estate market has experienced a downtrend, as NAR notes, market conditions vary widely according to geography.
For example, western Washington home sales dropped 8.6 percent in April from a year ago (though prices posted another month of double-digit growth), according to figures released in early May by the Northwest Multiple Listing Service.
However, in New Mexico, existing-home sales rose 26.2 in the first quarter of 2006 compared to the first quarter of 2005, NAR reported. Louisiana’s first-quarter resale pace rose 22.9 percent from a year earlier, while Montana experienced the third strongest gain, up 17.5 percent, according to NAR. Six other states recorded double-digit sales increases from a year ago.
According to the “Real Estate Cycle in 2006” study by First American Real Estate Solutions published last week, places like California, Florida, New York City and Las Vegas, which have already had rapid price rises, may have passed the high points of their cyclic price fluctuations. Other areas, especially America’s heartland, may provide more fertile ground for investment and purchase, the study suggested.
Reports from heartland states like Illinois bear this out. Single-family home and condo sales rose 2.1 percent in the first quarter compared to a year ago, the Illinois Association of Realtors reported in mid-May.
In the Midwest, existing-home sales rose 1.1 percent rose in 2006’s first quarter to a 1.56 million-unit annual sales level from the first quarter of 2005, according to NAR.
In contrast, in Southern Florida, one of the areas with the strongest price runups, April inventory spiked 300 percent from a year ago in April, according to the Realtor Association of Greater Fort Lauderdale.
And sales in the San Francisco Bay Area, home of GreenCity Lofts, real estate sales dropped 25 percent, according to DataQuick Information Systems. A total of 8,358 new and resale houses and condos were sold in the nine-county region last month, down 25.1 percent from 11,158 for April last year.
Meanwhile, Justin Tamblyn of GreenCity Lofts and his colleagues are scrambling. A 20-foot-long banner proclaiming “GreenCityLofts.com,” adorns the north side of the building, and six small red “open house” signs from Alpha Real Estate line the sidewalk outside, along with an 8-by-4-foot sign advertising the development, all in hopes of luring buyers.
It’s yet to be seen how successful these efforts will be.
“The Federal Reserve will probably jack up interest rates a few more times to contend with gas prices and inflation,” said San Francisco Bay Area prospective buyer Faulkner. “We want to be cautious.”
Or, as Marshall Prentice, DataQuick’s president said, “Are we heading into a market lull? Or are we seeing the beginning of a significant downturn? Summer is going to be interesting, to say the least.”