Price Is Right: Home Buyers Are Testing the Market Again
Senior Editor, CNBC
The large plate of home-made chocolate chip cookies on the kitchen counter was the perfect enticement for one member of a family attending a Morris Township, New Jersey open house.
"Go ahead and take another," said real estate agent Kim McDonald to the high school freshman who gobbled up her second cookie while her mother and father were walking through the upper part of a three-bedroom, two-and-a-half bath home listed at $565,900.
The girl's parents are searching for a house to be closer to the private school she currently attends. And now is the right time they say.
"We're looking and hoping to find a good deal," says the girl's mother. "But we're looking for a price we can afford."
After what seemed like an endless free-fall in the housing market, signs are emerging that buyers are slowly coming back.
Though the evidence is still anecdotal, conversations with potential home buyers and real estate agents indicate that housing prices may finally have fallen far enough to bring some people back into the market.
"In some markets, prices have gone up," says Errol Samuelson, president of Realtor.com, the web site of the National Association of Realtors. "But we're still seeing some prices lower from last year by some 11 percent."
U.S. home prices fell a record 8.2 percent in 2008 as the recession and the surge of foreclosures caused the worst devaluation of real estate since the Great Depression, according to the Federal Finance Housing Board.
A recent online survey by Century 21 Real Estate of those who say they will buy a home within the next two years points out how pricing is effecting the market:
- 78 percent of those surveyed say now is a good time to buy a house
- 68 percent say now is a better time to buy than six months ago
Besides falling prices, experts point to lower interest rates as an incentive. The rate on 30-year fixed-rate mortgages hit an average of 4.85% for the week ending March 26. It's the lowest rate since Freddie Mac’s weekly survey began in 1971.
There's also the tax credit up to $8,000 for qualified first time home buyers in 2009, that was included in the Obama Administration's stimulus bill.
"First time home buyers are getting great incentives," says Suzanne White, a real estate agent in Tampa Bay, Florida. "I sold a house 45 days ago to a 57 year old first time buyer. I'm seeing a lot of that."
White says her business has tripled since February. She's not alone in seeing an uptick.
"We've sold more than 110 homes since the first of the year," says Rhonda Duffy, a broker at Duffy Realty in Atlanta, Georgia who thinks buyers don't want to be left behind in an 'improved' market. "The selling pace is much higher than at the end of last year."
There's also the increasing number of foreclosures bringing in buyers, says Bob Bellack, chairman of home auctioneer Zetabid.
"The investor market for bank owned homes has heated up in the last two months," says Bellack. "At our recent auction in South Florida, we had a very high bid-to buy ratio. We saw the same at our Phoenix auction."
As for sellers, putting the right price on the home is what will get it sold, says real estate agent White. "There are checks and balances now to make sure values of home are right," White says. "The owner that realizes that will sell their house."
And whether it's a buyers or sellers market depends on your point of view, says Duffy. "Greed and fear are motivating both. That's no different than in any market."
"It's neither a buyer's or seller's market," says Jim LeBaron, Senior Director at BBK, a firm that provides real estate services. "The normal supply and demand relationship does not exist right now because there's a real lack of confidence in the market."
But if any of the signs are indications of a housing recovery, experts say it's way to early to tell.
"Consumer confidence is very shaky right now," says Jim Randel of Rand Real estate. "Traditional home buyers are more cautious than speculators and there are still a lot of problems in the housing pipeline."
"There are always a small percentage of people unaffected by an economic crisis," says Aime Jackson, founder of a non-profit advocacy organization on foreclosures. "Those are the people buying homes now."
Jackson says that less than 25 percent of the mortgage activity so far this year has been from consumers buying homes. "A lot of the mortgage business is refinancing," says Jackson. "And that doesn't mean a rebound in housing."
And unemployment remains a key, says realtor McDonald at the New Jersey open house. "We had a bid from someone but then he lost his job. He was in IT and after that, he had to withdraw the offer."
There's also foreclosures. While they create opportunities for some home buyers, analysts say they are helping to destabilize the housing market.
"The excess supply of housing hangs over the marketplace like a dark cloud," says Michael Goldsmith, managing director at BBK. "A foreclosure moratorium would help reduce the glut of homes on the market. Too many foreclosures mean a weak economy and that will slow down a housing rebound."