House Prices Slide as Property Glut Grows
Buyers Gain Bargaining Power
In Busy Spring Selling Season;
Auctions in Palm Springs
By JAMES R. HAGERTY
April 25, 2007
Tighter credit and a growing glut of properties are depressing an already weak U.S. housing market, wrecking the industry's hopes for an early rebound.
That leaves buyers in a strong position to negotiate for bargains during the spring home-shopping season, the busiest time of the year for housing sales.
Yesterday, the National Association of Realtors reported that sales of previously occupied homes in March dropped 8.4% from the prior month to a seasonally adjusted annual rate of 6.12 million units -- the largest monthly drop since 1989. The trade group said the median price for homes was $217,000 in March, down 0.3% from a year earlier.
The data reflect sales that closed in March; most of those were negotiated in January and February. The Realtors said bad weather in February hurt March sales. The drop in March followed three months when home sales increased nationally.
Since March, the market appears to have deteriorated further in many parts of the country. Reports from builders show that sales in the past few weeks "have really plunged," says Ivy Zelman, a Cleveland-based housing analyst for Credit Suisse Group. She says prices of new homes also are falling as tighter credit eliminates some potential buyers and builders struggle to shed excess inventory.
Lenders, stung by a surge in defaults, have rediscovered the virtues of caution over the past few months, eliminating many of their no-money-down loan offerings. That tightening is "really starting to bite," says Ed Mixon, a real-estate agent for Re/Max Real Estate Services in Monarch Beach, Calif.
Mr. Mixon recently had to advise one of his clients, a young woman with a good job and credit record, to put off her dream of buying a $300,000 condo in Laguna Niguel, Calif., until she could come up with more than her current nest egg of $5,000 for a down payment. A year ago, he says, she could easily have obtained a loan to cover 100% of the condo's price.
Stricter lending standards will reduce demand for housing by 10% this year from where it would have been had credit remained loose, estimates Thomas Lawler, a housing economist in Vienna, Va. He expects housing prices, as measured by the national S&P/Case-Shiller index, to fall 7% in the fourth quarter of 2007 from the year-earlier level.
Standard & Poor's reported yesterday that the S&P/Case-Shiller 20-city composite index in February was down 1% from a year earlier. The metro-area price changes ranged from drops of 7.8% in Detroit and 5% in San Diego to rises of 10.6% in Seattle and 7.7% in Portland, Ore. In 15 of the 20 cities, March prices were down from a month before.
All this has made many sellers more willing to negotiate. Shawn Gabbaie, a real-estate agent in Los Angeles who bought a new three-bedroom house in Las Vegas as an investment several years ago for about $275,000, is now trying to sell it for $299,900. He's offering to provide partial financing to a buyer, or to lease the house for $1,200 a month. Mr. Gabbaie says he's "definitely" flexible on the terms.
Where sellers are inflexible, buyers generally will find plenty of alternatives. The Wall Street Journal's latest quarterly survey of residential real estate in major metropolitan areas -- drawn from a wide range of sources in 28 major markets -- found particularly large jumps from a year ago in listings of homes in Florida. Orlando and Tampa were both up 62%, closely followed by Miami (58%) and Jacksonville (49%).
In Florida's St. Lucie County, current inventory is enough to last more than 34 months at March's sales rate, says Mr. Lawler. The supply is 29 months in Palm Beach County and 25 months in both Miami-Dade and Broward counties, he adds.
Other cities with big increases in listings from the already swollen levels of a year ago include Phoenix (36%), Chicago (44%), Los Angeles (54%) and Las Vegas (30%). The inventory was little changed but still plentiful in the San Diego and Washington, D.C., areas.
With some exceptions -- including Seattle, Houston and Manhattan -- prices generally are flat to declining.
At the same time, delinquent mortgage payments -- a precursor of more foreclosures -- are on the rise. Lenders sent 46,760 default notices to California homeowners in the first three months of this year, more than double the year-earlier tally and the highest in nearly 10 years, according to DataQuick Information Systems, a research firm in La Jolla, Calif. Defaults were particularly prevalent in Sacramento, Riverside and San Joaquin counties.
Using nationwide data, Moody's Economy.com, a research firm in West Chester, Pa., found that Miami, Houston and Orlando all had big jumps in the proportion of borrowers who were behind on loan payments in the first quarter.
Not all delinquent payments or defaults lead to foreclosures, of course, but most experts are expecting a sizable increase in foreclosures over the next year or two as home prices weaken. That will add to the glut of homes for sale.
In areas near new construction, sellers of older homes are up against builders determined to cut prices as much as necessary to shed inventory. "We're marking our inventory to market across the country," Donald Tomnitz, chief executive of D.R. Horton Inc., said in a conference call with analysts last week.
Lennar Corp., another big builder, is experimenting by offering a couple dozen new homes in the Palm Springs, Calif., area for auction on RealtyBid.com. For one group of Lennar condos in La Quinta, Calif., originally priced at around $430,000, bids were between $251,000 and $257,000 yesterday. The auction ends May 8.
Boston, which started to weaken three years ago, is now showing signs of stabilizing. In March, area listings were down 11% from the bloated level of a year before. Agreements to buy homes in the first 23 days of April totaled 1,894, up 2.8% from a year earlier, according to MLS Property Information Network Inc. in Shrewsbury, Mass., but the median price in the latest period edged down 1.2% from a year earlier, to $415,000.
Some of the strongest markets have recently shown signs of modest cooling. In the Portland, Ore., area, listings in March totaled 10,557, up 87% from a year earlier, according to Regional Multiple Listing Service, which operates the multiple-listing service there.
In the Houston area, where oil-industry strength has buoyed demand, March listings rose 12% from a year earlier to 37,671. Pending sales edged up 2.7% from a year earlier, and the median price for single-family homes stood at about $151,000, up 5%.
Manhattan remains strong. Real-estate broker Corcoran Group says home listings there totaled 8,234 in March, down 11% from a year earlier. That shrinking inventory reflects a surge in sales in the first quarter, when the median price for condos and co-op apartments increased 1.2% to $835,000, says Jonathan Miller, chief executive of Miller Samuel, an appraisal firm.
Mr. Miller says Wall Street bonuses and hedge-fund profits are fueling the market, while the weaker dollar attracts European buyers. But listings on Long Island and in the New York borough of Queens totaled 31,954, up 18%, according to the Multiple Listing Service of Long Island.
Realtors are looking for reasons to be hopeful, but few expect a rapid turnaround. In Vero Beach, Fla., the condo supply is enough to last more than 33 months at the current sales rate, says Sally Daley, owner of Daley & Co. Real Estate. Even so, she says more people are out looking for bargains. "We really think the worst is over," she says.
Buyers Gain Bargaining Power
In Busy Spring Selling Season;
Auctions in Palm Springs
By JAMES R. HAGERTY
April 25, 2007
Tighter credit and a growing glut of properties are depressing an already weak U.S. housing market, wrecking the industry's hopes for an early rebound.
That leaves buyers in a strong position to negotiate for bargains during the spring home-shopping season, the busiest time of the year for housing sales.
Yesterday, the National Association of Realtors reported that sales of previously occupied homes in March dropped 8.4% from the prior month to a seasonally adjusted annual rate of 6.12 million units -- the largest monthly drop since 1989. The trade group said the median price for homes was $217,000 in March, down 0.3% from a year earlier.
The data reflect sales that closed in March; most of those were negotiated in January and February. The Realtors said bad weather in February hurt March sales. The drop in March followed three months when home sales increased nationally.
Since March, the market appears to have deteriorated further in many parts of the country. Reports from builders show that sales in the past few weeks "have really plunged," says Ivy Zelman, a Cleveland-based housing analyst for Credit Suisse Group. She says prices of new homes also are falling as tighter credit eliminates some potential buyers and builders struggle to shed excess inventory.
Lenders, stung by a surge in defaults, have rediscovered the virtues of caution over the past few months, eliminating many of their no-money-down loan offerings. That tightening is "really starting to bite," says Ed Mixon, a real-estate agent for Re/Max Real Estate Services in Monarch Beach, Calif.
Mr. Mixon recently had to advise one of his clients, a young woman with a good job and credit record, to put off her dream of buying a $300,000 condo in Laguna Niguel, Calif., until she could come up with more than her current nest egg of $5,000 for a down payment. A year ago, he says, she could easily have obtained a loan to cover 100% of the condo's price.
Stricter lending standards will reduce demand for housing by 10% this year from where it would have been had credit remained loose, estimates Thomas Lawler, a housing economist in Vienna, Va. He expects housing prices, as measured by the national S&P/Case-Shiller index, to fall 7% in the fourth quarter of 2007 from the year-earlier level.
Standard & Poor's reported yesterday that the S&P/Case-Shiller 20-city composite index in February was down 1% from a year earlier. The metro-area price changes ranged from drops of 7.8% in Detroit and 5% in San Diego to rises of 10.6% in Seattle and 7.7% in Portland, Ore. In 15 of the 20 cities, March prices were down from a month before.
All this has made many sellers more willing to negotiate. Shawn Gabbaie, a real-estate agent in Los Angeles who bought a new three-bedroom house in Las Vegas as an investment several years ago for about $275,000, is now trying to sell it for $299,900. He's offering to provide partial financing to a buyer, or to lease the house for $1,200 a month. Mr. Gabbaie says he's "definitely" flexible on the terms.
Where sellers are inflexible, buyers generally will find plenty of alternatives. The Wall Street Journal's latest quarterly survey of residential real estate in major metropolitan areas -- drawn from a wide range of sources in 28 major markets -- found particularly large jumps from a year ago in listings of homes in Florida. Orlando and Tampa were both up 62%, closely followed by Miami (58%) and Jacksonville (49%).
In Florida's St. Lucie County, current inventory is enough to last more than 34 months at March's sales rate, says Mr. Lawler. The supply is 29 months in Palm Beach County and 25 months in both Miami-Dade and Broward counties, he adds.
Other cities with big increases in listings from the already swollen levels of a year ago include Phoenix (36%), Chicago (44%), Los Angeles (54%) and Las Vegas (30%). The inventory was little changed but still plentiful in the San Diego and Washington, D.C., areas.
With some exceptions -- including Seattle, Houston and Manhattan -- prices generally are flat to declining.
At the same time, delinquent mortgage payments -- a precursor of more foreclosures -- are on the rise. Lenders sent 46,760 default notices to California homeowners in the first three months of this year, more than double the year-earlier tally and the highest in nearly 10 years, according to DataQuick Information Systems, a research firm in La Jolla, Calif. Defaults were particularly prevalent in Sacramento, Riverside and San Joaquin counties.
Using nationwide data, Moody's Economy.com, a research firm in West Chester, Pa., found that Miami, Houston and Orlando all had big jumps in the proportion of borrowers who were behind on loan payments in the first quarter.
Not all delinquent payments or defaults lead to foreclosures, of course, but most experts are expecting a sizable increase in foreclosures over the next year or two as home prices weaken. That will add to the glut of homes for sale.
In areas near new construction, sellers of older homes are up against builders determined to cut prices as much as necessary to shed inventory. "We're marking our inventory to market across the country," Donald Tomnitz, chief executive of D.R. Horton Inc., said in a conference call with analysts last week.
Lennar Corp., another big builder, is experimenting by offering a couple dozen new homes in the Palm Springs, Calif., area for auction on RealtyBid.com. For one group of Lennar condos in La Quinta, Calif., originally priced at around $430,000, bids were between $251,000 and $257,000 yesterday. The auction ends May 8.
Boston, which started to weaken three years ago, is now showing signs of stabilizing. In March, area listings were down 11% from the bloated level of a year before. Agreements to buy homes in the first 23 days of April totaled 1,894, up 2.8% from a year earlier, according to MLS Property Information Network Inc. in Shrewsbury, Mass., but the median price in the latest period edged down 1.2% from a year earlier, to $415,000.
Some of the strongest markets have recently shown signs of modest cooling. In the Portland, Ore., area, listings in March totaled 10,557, up 87% from a year earlier, according to Regional Multiple Listing Service, which operates the multiple-listing service there.
In the Houston area, where oil-industry strength has buoyed demand, March listings rose 12% from a year earlier to 37,671. Pending sales edged up 2.7% from a year earlier, and the median price for single-family homes stood at about $151,000, up 5%.
Manhattan remains strong. Real-estate broker Corcoran Group says home listings there totaled 8,234 in March, down 11% from a year earlier. That shrinking inventory reflects a surge in sales in the first quarter, when the median price for condos and co-op apartments increased 1.2% to $835,000, says Jonathan Miller, chief executive of Miller Samuel, an appraisal firm.
Mr. Miller says Wall Street bonuses and hedge-fund profits are fueling the market, while the weaker dollar attracts European buyers. But listings on Long Island and in the New York borough of Queens totaled 31,954, up 18%, according to the Multiple Listing Service of Long Island.
Realtors are looking for reasons to be hopeful, but few expect a rapid turnaround. In Vero Beach, Fla., the condo supply is enough to last more than 33 months at the current sales rate, says Sally Daley, owner of Daley & Co. Real Estate. Even so, she says more people are out looking for bargains. "We really think the worst is over," she says.
No comments:
Post a Comment