Sellers want two years ago prices, so buyers are waiting to see if sellers are ever going to face reality. The homes that are selling, are going for $40,000-$100,000 below the ORIGINAL list price, and most of these home have been on the market 6 months to 1 year, some even more. Another concern is the interest rate. Buyers are looking to save anyway they can. First time home buyers need the lowest % available. Income has not kept pace with the high cost of a home so many buyres are now priced out of the market because they just don't have the income. Yes, it is a good time to buy, but alot of people don't have the money to do so.
And in all honesty, some buyers are scared that if they buy now, the value of the home will keep decreasing and that they wil overpay.Hope this helps!
My theory on MN is this: people are much more settled there than many areas of the country. If they are moving, they are generally not moving very far. In many cases, adult children are selling their aging or late parents' homes, and they have the luxury of waiting for top dollar. Carrying costs on paid-off family homes are small enough they can hold out a year rather than drop $40k or more to move a property.
I have been tracking properties in the Mpls metro since Feb. What I'm seeing now are a bunch of rank-and-file homes (3BR, 1.5BA, ~2000 sq ft) all holding at $400k to $499k being most of the inventory. Most are nothing exceptional, and they are not clear bargains. I did see quite a few "cherries" going cheap in March and April, but now all the cream seems to have been skimmed off the top, and the so-so homes are sitting with patient sellers refusing to rush to liquidate. The unique, larger, special old homes in the prime District 1 neighborhoods are all over 750,000 now, and not coming down a bit any time soon. Even the bank-owned properties have a lot of attitude-laced language in their supplementals, warning people that their "lowballs" will be sent straight to the trash bin without even the courtesy of reply. It's plain weird.
Since then, home values have been in decline! This is fact and NOT opinion! At this point, many San Diego neighborhoods have had double digit value declines!
From the local San Diego Union-Tribune newspaper dated 3-18-2007, here are a few selected median home value drops just since February 2006 for resale homes:
Coronado 50%, La Jolla 15.6%, Pacific Beach 15.8%, North Park 15.8%, Ocean Beach 19.1%,San Carlos 19.1%
Keep in mind, the average San Diego median home price is over $550,000. So, a 15% decline is a $82,500 loss! If you purchased last year, even with 20% down payment, your San Diego home could now be worth MUCH LESS than the amount of your mortgage!
With my take on the background of the current San Diego real estate market expressed, my opinion on the immediate future is that we are now in a seasonal sales pick-up. In a few months, I believe that the downward trend will re-establish itself and not only only continue, but is likely to accelerate as the popular adjustable rate mortgages from the last few years come up for their first adjustment.
Yes, San Diego housing values could easily be down 25 to 30% from their summer 2005 values by the end of 2007.
Based on these facts, only a fool would believe the industry line of it's always a good time to buy real estate.
For some great 'insider' articles on the San Diego real estate market, which I believe will apply to any of the hot real estate markets of the past five years.....visit:
Jennifer had mentioned, "Sellers want two years ago prices, so buyers are waiting to see if sellers are ever going to face reality. " In my area, a lot of sellers bought their homes 2-3 years ago and are asking 20-70% MORE than what they bought at in 2005 and 2006, when in reality, they should be asking for less than 2005-2006 prices. They remodel a kitchen and then ask for $600K MORE. Does this make sense to you? Some sellers are so far from reality... but haven't lowered their prices despite being listed for over 200 days. As Robert asked, "the bigger mystery seems to be, in markets where asking prices are steady but inventory and time-on-market have gone up dramatically, why haven't price reductions followed?"
Just because the current seller doesn't want to lose his down-payment money, doesn't mean I should over pay and lose my down-payment.
As a buyer, I am hesitant to sink my hard-earned $$ into a home in which I will lose the equity in my down-payment in a year. We have intentions of being in this for the long-term, but who knows, what if our work/family situation changes and we need to move in a few years. For example, how many of you realtors are now earning the same or more as you were 2 years ago?
1. Current over-supply. Prospect of more supply: foreclosures due to resetting ARMS in 2008, 2009, 2010, and 2011 (see http://patrick.net/wp/wp-content/resetchart1.jpg,
2. Interest rates unlikely to move substantially. FED will lower the overnight rate down to 3.00 by the end of 2008. I know the 30-yr rate moves differently, but I don't see any fundamental reasons for that to move up.
3. Reduced demand. Sub-prime buyers are gone, easy to get mortgages are gone. Getting a mortgage will only get tougher come 2008.
4. Learning. If in 2006 you faced a decision to buy or wait, and you waited, you got rewarded. So current buyers rather wait then buy. Of course, this is market specific (nothing like this yet in SFO, NYC, etc).
Let's face it, most markets are still at or near the top of the bubble. Don't believe me? Check out figure 2 in this report: http://www.mplsrealtor.com/Segments/Realtors/housingmarket07.pdf0. There is no reason why long-term housing appreciating should significantly exceed income increase (plus a bit to account for population increase).
6. Prognasticators were wrong in 2006, and buyers are acutely aware of that.
7. Negative news. This, BTW, makes everything worse. There are so many sources of housing news: monthly median sale prices from several sources, monthly new housing starts, existing home sales, new home sales. They have all been pretty negative for most of the country for the past, oh I don't know how many months,
8. Buyers who are actually serious about buying don't think there are real deals to be had. See Darren below. But what Darren says is true of the overall market (i.e., many people with low carrying costs are willing to wait for a long time), then we will see stagnation of prices for years to come.
I'm sure most of you have had a chance to enter any one of the huge warehouse stores. They have a ton of inventory don't they? Now when you are looking for your items it will take a little longer shopping in one of these stores. Yes but, you are nearly certain you will not be paying too much on your purchase. This is the same emotional reaction todayâ€™s buyers are struggling with. There is and have been a rising number of properties that fit their needs. The difference is that most of the buyers have trust issues. They are hesitant to commit because a better opportunity is just around the corner. This is why in todayâ€™s market it is so important to surround yourself by the professionals who specialize in "servicing" the client s needs. To start they should be real estate professionals who know the local market environment. They should understand the tempo of the market. Buyers should be informed on the correct timing to react appropriately when considering making an offer, structuring the offer to close on time, developing an understanding of value vs. unrealistic wants and how people in the industry are compensated.
Hope this helps you better prepare yourself and your clients.
However, even if the price comes down, even if the bank comes back and wants to bargin with us.......what is the best deal to make right now in case prices continue to drop? For example: List price $450K, tax value $550K, last home sold in the area $420K......what do you pay so that 1 year from today, you don't have a home that is now valued at $350K and you paid $400K?
In light of 5.625% 30 year fixed interest rates today, I would hope that interested Buyers start to think seriously about swinging thier pens. These market conditions of great values and interest rates will not go on forever, and now is a great time to buy.....here!
Many of the answers below are right on.....one of the other things that I think has had the market unsettled is the media and it's talk of the mortgage business in shambles. Many, many consumers know little about the mortgage industry and the avialble product out there, and I feel that the mortgage industry scare has many Buyers just taking a wait and see attitude. All they hear is about inceasing payments, foreclosures, arms, interest only and other terms that the mass know little or nothing about and would rather sit on the sidelines for a bit till all the dust settles.
I hope that makes sense.
Many other parts of the country are hurting, however. The relentless media "market meltdown/bubble" drumbeat has buyers a little skittish.