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Home sellers dropping bottom lines
Sign outside a house in Pasadena, Calif. indicates a reduced sale price
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Kai Ryssdal: It is a veritable smorgasbord of economic delights out there today. We'll begin with you: the humble American consumer. Retail sales reports from last month came in this morning a bit better than anybody had been guessing. I saw one analyst quoted as saying consumers are starting to dip their toes back in. But only their toes. Mortgage rates are down. Freddie Mac reported the rate on traditional 30-year fixed loans stayed below 5 percent for the second week in a row. Mortgage applications, especially for refinancings, are up. Welcome news for the housing market.
A report out from the real-estate company Trulia says something else is happening, too. Sellers are dropping their prices. Marketplace's Alisa Roth explains why.
ALISA ROTH: Claude Sigmund put his two-bedroom house on the market in St. Paul just over a year ago. He listed it at $145,000. He thought it was worth more. But the realtor convinced him.
CLAUDE SIGMUND: I had a grand total of 54 showings on my house before it finally sold. And I was selling it for $100,000. They offered 90 and I pay closing costs, and that was the best deal I had received.
A lot of homeowners are finding themselves in a similar position. Trulia's a real estate listing company. It says about a quarter of all people currently trying to sell homes have cut their prices at least once. That data doesn't include foreclosure sales.
Chris Mayer tracks real estate at Columbia's business school. He says reality is finally sinking in for home sellers.
CHRIS MAYER: There's an initial loss and people are looking at this and saying, but God, I paid $400,000 for the house. I'm just not going to sell it at $300,000. And over time, people realize that $400,000 isn't coming back and they adjust their expectations.
Of course, the economy's still rocky. And people are still losing jobs. So some homeowners are just plain desperate.
Heather Fernandez works at Trulia. She says more and more people are getting notices of default, the last warning before foreclosure.
HEATHER FERNANDEZ: A trend that we're seeing is an increasing level of notice of defaults across the country, which leads us to believe that sellers are going to have to sell.
She says all this can mean good news for buyers, who if they have cash, can get some very good deals.
In New York, I'm Alisa Roth for Marketplace.
My wife and I are looking for our first house. We like most buyers on the market are first-time home buyers and are relying on the Governments First-time Home-buyer Assistance(FHA) program. We have looked at a number of homes that we would be willing to pay more then asking price for, but we cannot get financing for more then what the property assessment says the value is. There are usually numerous offers at this value and the person with the most cash wins. Distressed sales are holding down the market but so are the rules for FHA loans. If the government would like to see housing prices recover and reduce the distressed inventory, it needs to loosen the rules for its FHA loans.
We live in Charlotte, NC, one of the last cities in the US to be hit by the housing crash. We downsized to a smaller home a year ago and put our 3,100 sq. ft., 3 BR, 3.5 BA house with a deluxe newly remodeled kitchen on the market at $390,000. 12 months later, we've not had a single offer. We've dropped the price five times. It's now priced at $300,000 (nearly $6,000 below tax value, and still no interest. We can't rent because our HOA won't allow it. 12 months from now, if the house still hasn't sold, our insurance company says it will cancel our fire policy. They won't insure against any other risks because the house is vacant.
In South Florida, where we've been hit hard, most homeowners have moved into realistic pricing territory. But as demand for lower priced homes - those in the $150,000 - 350,000 range - have ramped up, seller's concessions on price have dropped from highs of 12-15%, down to an average of 3-4%. Which just goes to show that even in a tough housing market, supply and demand still works its magic.
Markets are regional and within each region, whats happening in each town and even neighborhood can be very different. We Realtors have the market data to show the list to sale price, months of inventory and sales history showing declines and surges in prices and inventory by year, season and today. That information tells you waht you can get for your house and in how much time. Realtors need to share this with their clients to adjust expectations and sellers need to heed it - or perhaps get into trouble before anyone can help them.
