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KAI RYSSDAL: I’m pretty sure the Fed didn’t time it this way on purpose, but Tuesday’s rate cut couldn’t have come at a more opportune moment for the housing industry. January’s traditionally the time of year when home sales pick up again after the holidays. That usually means swarms of real estate agents braving the weather, but not this year. The credit squeeze has made home loans harder to come by, so sellers are thinking twice before they put their places up for sale.
Sally Herships met one couple that’s trying to decide.
SALLY HERSHIPS: These days the housing market feels like an overstocked grocery store
with hardly any customers browsing the aisles, so it’s easy to understand why homeowners are having trouble with the decision to add more inventory to the shelves.
DIANA ABUJABER: I’m not sure we’ve even made the decision.
Diana Abujaber and her husband Scott Easton are on the fence. In fact they’ve been on the fence for five years, which is almost as long as they’ve owned their home.
SCOTT EASTON: We’re sure we want to move, but we still are asking each other, well should we?
ABUJABER: I wouldn’t describe it as a decision, as a conversation.
EASTON: Yeah, that’s good, conversation.
ABUJABER: It’s the matrix. We’re in the move matrix.
Scott and Diana are both writers. They live in Coral Gables, outside Miami.
EASTON: We just, we want more space. We want a bigger house.
Scott’s priority is his home office. Right now he works in a Florida room. For those of you who don’t speak Floridian, that’s a converted porch. He wants a real office, a bigger one, and he wants space for a boat. Diana on the other hand, is worried about pulling up their roots. She considers their local friends family, so she’s torn about the idea of moving — and then there’s the money.
EASTON: I don’t really want to take on additional debt, in spite of what Diana says.
ABUJABER: That’s not a very exciting plan. No, my idea is to sell more books. I’m always thinking the next novel is going to do it.
EASTON: Well these are all variations on just saving the money.
ABUJABER: Oh, that’s true, but mine’s more exciting than yours.
EASTON: Yours is more exciting, yeah.
While Diana and Scott debate, the market is melting underneath them. House values have fallen sharply in their community, but their spirits are still high.
EASTON: As prices fall, yes our house price falls too, but so does the one that we’ll ultimately buy.
CHRIS MAYER: There aren’t really any winners right now.
That’s Professor Chris Mayer, director of Columbia University’s Center for Real Estate.
MAYER: People think that, well if house prices fall that’s bad for sellers and good for buyers. Well it’s not so simple.
Mayer says sellers are worse off because prices have fallen, and with lenders tightening terms on mortgages it’s tough to find buyers, whichever market you’re in.
MAYER: I don’t think there’s anywhere that’s insulated when it’s hard to get a mortgage.
But although the market forecast looks gloomy, Mayer says it’s still possible to sell, but he says homeowners need to get an accurate read on the market first. Just looking at comparable sales won’t do it. Mayer says the sale price of a house that closed today was probably decided three or four months ago.
MAYER: So when prices are declining people tend to overprice their house, and when prices are rising people tend to underprice their house. What you really need to be doing is be forward-looking, not backward-looking.
Scott and Diana are looking forward — to a complete market collapse, believe it or not. Scott says their house doubled in value in the first two years after they bought it, and their property taxes are so high that it’s become almost too expensive to live in the house.
EASTON: We have just a regular mortgage. You know, we did a regular down payment, and we pay more in taxes and insurance than we do on the principal of the loan.
Scott says he wouldn’t mind even if the price of his home fell below purchase. He sees a flat market as a golden opportunity to bargain shop, and to lock in manageable tax rates. That way, he hopes he and Diana could afford the larger house they’re dreaming of.
I’m Sally Herships for Marketplace.
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