Home Sales Soar by Record Level. Or so says the headline.
Read into the report and you'll see that in April new home sales were up 16.2 percent while median prices tumbled 11.1 percent. Consider it a short-term new-home "fire sale," which makes sense if you look at the factors.
First, the stats factor only new home sales, versus the existing home sales that are lulling to even out the numbers across the board. Second, home vacancy rates in the first quarter 2007 were 10.1 percent for rental housing and 2.8 percent for homeowner housing, roughly .6 percent higher than one year before. And finally homes are now being mortgaged to the hilt, with the amount of money sunk into home loans at the highest point in 37 months. (Note that rates on 30-year, fixed-rate mortgages were 6.18 percent in April, down .34 percent from one year before.)
With developers trying to offload unsold properties, a market where homes are sitting empty longer, and homebuyers already tapped out, it stands to reason that prices on new homes would fall. This could mean good news for first-time homebuyers and real estate investors who can bide their time for the lowest prices on new properties, particularly those desired by boomers (see "The Bottom Line on Real Estate Trends: What do baby boomers want?").
But this fire sale, if you will, isn't necessarily a sign of impending real estate doom. With lower prices and cheaper credit, comes increased demand. And you guessed the result of increased demand....yep, higher prices once again.
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Comments: 26
Isn't it also the time of year that family size homes slump?? I seem to remember that the market gets warmer in the next month or so because families want to be moved and settled for the new school year. I hope, I hope.
I wrote about it on http://www.grumpstump.com check it out for some more information if you like.
In my area, a home owner was trying to sell a property himself, for $49,000. He wasn't getting the word out, so he hired a realtor, who listed the property for $70,000. How is being listed worth $21,000?
I found out about the property the weekend that the realtor put the sign up and was going to contact the owner. I would have bought the property for $49,000 . I will not pay $70,000, as the area that the property is in, it is not worth $70,000. If it was in the city where the realtor is based, it would be worth that, but it is in a rural town nearby.
I see this as a major part of the problem right now. Asking prices are being inflated.
What is keeping most of the people into getting into the real estate market is what they hear or see from the media. If you just keep an open eye, opportunities seems to start showing up now. I still see a lot of developments going on despite the fact that news keep on saying that 'certain developer' lost money here and there. Fuel that with a dose of election activities and I think you are in for a pleasant surprise.
I still go with the fundamentals. Run the numbers and check it out.
Regarding the contest to make a food garden instead of a pesticided grass monoculture by the river, I did not win. To keep this on topic though, Portland's real estate market is holding up better than other places because young people seem to be moving here even if they don't have jobs. It is an entertaining place to hang out. The Village Building Convergence just concluded. It is all about making safe hanging-out places in neighborhoods: sculpted clay benches, saunas out of a generous person's garage, gardens like the one I wanted to do in the contest. People come here on vacation, and then stay. In the tai chi group I used to belong to, there were people like that from back east, and they weren't that young. They were retired. One couple bought a condo and only planned to stay a few years. They are still here 5 years later, and they bought a bigger house.
I somewhat doubt there are too many cities with tall bike jousting at monthly street fairs. Am I right? San Francisco? Berkeley is probably weirder than Portland, but also more expensive.
I am renting out rooms in my house so I can pay the property taxes, mortgage, insurance, and utilities. My uncle, who is sensible, says just sell it. But I would miss my mints, blueberries, grapes, onions, etc. It's often scary to keep it, but it would be scary to sell also.
Mary S.
Merica, you are so cute!
Bob B., it's true that prices in the Utah area appear to be dropping. The market isn't fueled by real estate prospectors, in for a cheap home loan, as it once was. I'll be curious to hear how this plays out from your perspective.
Dan V., if there's one thing we can count on it is indeed the cyclical nature of any given market, whether the stock market or the real estate market. Good perspective.
Lisa, I posted a few articles here on Gather that get behind some of the foreclosure statistics that you might want to check out:
The Bottom Line: Foreclosures pinch American dream
The Bottom Line EXTRA: Mortgage pros scramble to modify loans
The Bottom Line: During foreclosures, these brokers get busy
Beryl Singleton Bissell, you bring up a good point about the North Shore, or any other highly-desired and hence high-priced area. At the prices many of these homes are at, even with the leveling, with the average worker's income going down in relationship to their other consumer expenses, people just can't afford as much as they once could.
William, the bottom line is indeed jobs, and disposable income. You're right on the money there.
Lynn O'Connell, thank you for your thoughtful response. It appears that the Washington D.C. area is consistent with most of the rest of the country. Though a search through the Multiple Listing Service database shows "time on market" for homes at around one to two months, that number is deceiving. In reality, agents simply relist a home after a few months to start the numbers fresh.
Joe, I will definately check out your link. We did see a big increase in new home sales in the first quarter (and a drop in existing home sales), so this would seem consistent with your explanation.
Shelley - who spends too much time working - L., like you I really enjoy the A&E television show "Flip this House." I have a feeling that selling these homes, and the inflated prices these flippers have been getting, won't be easy going forward. But we'll see....
How frustrating for you MrEl F.! You may still be able to approach the owner separately, to let them know you'll buy at their original price if the agent's commission drops the profits for a coming offer below it. I'm guess the agent is looking at comps in the area, and thinks the $70,000 price won't keep away buyers. Could the area being seeing some new development lately. Around here, in Portland, $70,000 is a snap-it-up-right-now steal!
arlene m., thank you so much for dropping by nonetheless.
George Manlangit, well said! Deals can still be had anywhere, even when a market is "stalled." (By the way, I've been seeing 20-plus percent returns on stock short positions of late.) Foreclosures aren't coming with the deal they once were though, since a record number of homeowners have leveraged their homes to the hilt. Hence, where you once could get into a foreclosure home just by paying the bank a few thousand now the bank is wanting $300,000. You get the picture. There are still finds here though, if you know where to look. One source I use is foreclosure database RealtyTrac.com.
And, last but not least, Mary, I loved your post. Thank you so much for catching me up to speed on everything that's going on in your life. We Portlanders must stick together.
Well, I enjoyed conversing with all of you. Thank you so much for your encouragement.
All my best,