Steve Owen said:
These guys need a reality check. Time on market used to run around 90 days in this area. That was back in the early 90's. Since about the time of the stock bubble crash, time on market has been more like 120 to 180 days in this market.
It is another example of bubble thinking that these realtors believe something like two weeks should be typical. Time on market extending out to 90 days is not a sign the bubble is popping, it's a sign that these markets are coming back into equilibrium. What had been a seller's market in these locations is moving back toward balance. The question is whether it will move on through that and to a buyer's market.
But there are also other sings in the market.
Home Sellers Cut Prices as Once-Torrid U.S. Market Turns Chilly
June 28 (Bloomberg) -- Ko Ueno, a 36-year-old tourism executive moving to San Diego, hasn't found a buyer for his one- bedroom condominium in Cambridge, Massachusetts -- even after cutting the price three times since October and offering a $6,000 cash rebate.
``A year ago, this unit would have gone in a matter of days, but now we have to offer incentives and a brand-new kitchen,'' his broker, Brenda van der Merwe, says as she inspects the kitchen's freshly painted walls.
Ueno, whose apartment near Harvard University went on the market for $329,000 and is now listed at $299,000, is caught in the first U.S. housing decline since 1999. Gone are the bidding wars that drove prices to record highs in each of the past five years. Now buyers have the upper hand, and are waiting for sellers to drop their prices and throw in such extras as country club-memberships and reimbursement for moving costs.
Sales of existing U.S. homes fell in May to an annualized rate of 6.67 million as higher mortgage rates sapped demand, the National Association of Realtors said yesterday. With the Federal Reserve poised tomorrow to raise its benchmark rate a quarter- point to 5.25 percent, according to all but two of the 126 economists surveyed by Bloomberg News, things are likely to get worse before they get better.
``The housing market isn't just cooling, there is a decided chill in the air,'' says Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``Market power is shifting from sellers to buyers as unsold inventories continue to rise.''
`Skunked'
The Washington-based realtors group said the number of unsold homes rose to a record. The U.S. Northeast had the biggest sales drop, falling 4.2 percent to an annualized pace of 1.13 million, the trade group said. The region is losing an average of 247,000 residents a year, the biggest annual outflow in the U.S., the Census Bureau said in an April 20 report.
Sales in the Midwest declined 3.8 percent, the West was down 0.7 percent, and the South fell 0.4 percent.
Many sellers are finding they must cut their initial asking prices by 10 percent or more to entice buyers, according to brokers. Real-estate agents sound more like car dealers as they use phrases like ``cash back,'' ``buyer rebates'' and ``must sell.'' They speak of being ``skunked'' at open houses -- meaning, no one showed up, even after the sellers made ``price improvements.''
``I've learned to bring a good book with me,'' says Christopher Rotondo, 32, an agent with Watermark Realty, as he sits alone at an open house in Newport, Rhode Island. ``Last year, we'd typically get 20 to 30 people. You needed an assistant to direct traffic and hand out brochures. Now, more likely, it's three or four people, and sometimes you get skunked.''
Hot Tub and Skylights
The 1,470-square-foot townhouse near Goat Island has a new kitchen, a ``spa room'' with a hot tub and skylights, refinished pine floors and a new kitchen. It came on the market in February for $479,900, was reduced in March to $464,900, and again in May to its current asking price of $449,900. Three people came to the two-hour open house June 25, Rotondo says.
The Federal Reserve wanted to take what former Chairman Alan Greenspan called ``the froth'' out of the real estate market as a side campaign in its war to contain inflation. Policy makers have raised borrowing costs 16 times since June 2004, pushing mortgage rates to a four-year high in May.
The average U.S. rate for a 30-year fixed mortgage was 6.62 percent. Adjustable-mortgage rates have climbed by more than 2 percentage points to 5.7 percent, removing from the market most investors who plan to ``flip'' properties and first-time buyers who are stretching to qualify for a loan, says David Berson, chief economist at Washington-based Fannie Mae, the largest U.S. mortgage buyer.
Rushing Out of the Market
Investors who buy homes to resell at a profit are rushing out of the market, putting more pressure on prices, Berson says. Such investors bought a record 2.34 million homes last year, according to data from the realtors group. Excluding investments, home sales rose 0.9 percent to 5.99 million last year.
``Investors can put their money in any asset they want, and with returns slowing, it makes it more likely they will pull out of housing,'' Berson says.
Shelley Grandy, 41, says investors ``dumping'' their properties have stalled her efforts to sell her four-bedroom brick townhouse in Sterling, Virginia. Grandy, who has two children, says she is moving and plans to rent a home for a year or two in her new neighborhood.
Paint and Carpeting
Grandy reduced the price of her home to $435,000 this week, after listing it for $455,000 in February. She painted her unit and installed new carpeting to make it more appealing. In addition, she's offering $10,000 for ``closing cost help.''
``The flippers turned it into a buyers' market because they're now desperate to sell,'' Grandy says.
Higher mortgage rates have been a boon to the rental market, as people opt to lease rather than buy a home. U.S. apartment rents increased at the fastest pace in five years during the first quarter, to a record $952 a month from $907 a year earlier, according to the National Multi-Family Housing Council.
Grandy said she'll be able to rent an $800,000 home for about $2,800 a month, and plans to move before September so her two children, 5 and 8 years old, won't have to change schools mid-year.
As for her townhouse, ``this is pretty much my bottom price,'' Grandy said. ``I won't go any lower than this. I'll just hold it and rent it, like a lot of people are doing.''
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