Revving Up Existing Home Sales Crucial Step in Recovery
Recognizing that getting the trade-up housing market back into full gear is a prerequisite for a sustainable recovery from the current industry slowdown, NAHB last week provided home owners with information geared to helping them move their properties so they can use the proceeds from the sale to buy a new home.
In his weekly syndicated real estate column for the Washington Post Writers Group, Ken Harney recently wrote that home owners have more discretion during today’s housing downturn because the general economy has not lapsed into the full-fledged recession that usually always accompanies a real estate slump. Many sellers who haven’t been able to obtain the price they want have simply taken their homes off the market, deciding to ride things out until the situation improves. In part, Harney said, this explains why housing prices have held firm in many parts of the country even where the sales pace has slowed markedly.
In the lead story in the Dec. 14 issue of HouseKeys, NAHB’s free electronic newsletter for consumers, Harney provides his readers with the assurance that selling a home in order to move to a new one is by no means impossible even in today’s soft market.
“To begin with,” Harney writes, “you’ve got to understand that while it may be a difficult time for sellers right now, it’s a great time for buyers. And you happen to be BOTH!”
“What you give up on the ‘sale’ side of your transaction, you may well be more than compensated for on the ‘buy’ side,” he says.
“Keep that in mind.," he adds. "You may be losing a little on one side, but gaining a lot more on the other — to say nothing of acquiring a new house with superior features and amenities.”
Mortgage Interest Rates Stoke Affordability
Even without advice from Harney and other experts on the housing market, home sellers have been receiving some assistance on the home financing front, where mortgage interest rates have remained at affordable levels, settling into a narrow groove somewhat below peak rates at the start of the year.
For the week ending on Thursday, Dec. 14, Freddie Mac's Primary Mortgage Market Survey found rates basically flat, following five consecutive weeks of small declines.
The 30-year, fixed-rate mortgage last week averaged 6.11%, up a scant 0.4% from the previous week. One-year Treasury-indexed adjustable-rate mortgages were up .02% from the prior week, to 5.45%.
Frank Nothaft, Freddie Mac’s chief economist, said that long-term mortgage rates are expected to rise over the new year, but “will very likely not get up to even 7%, which will help to moderate the current weakness in the housing market.”
Those in the best position to assess conditions in the existing-home sales market, the National Association of Realtors®, last week forecast that the 30-year, fixed-rate mortgage would gradually increase to 6.7% by the fourth quarter of 2007 at the same time as the overall sales pace begins to improve.
Window of Opportunity for First-Time Buyers
The Realtors® are expecting existing-home sales to rise gradually over the coming year from current levels, with the total for the year comparable to this year.
“Roughly three-quarters of the country will experience a sluggish expansion in 2007,” said David Lereah, the association’s chief economist, “while other areas should continue to contract for at least part of the year. Most of the correction in home prices is behind us, but general gains in value next year will be modest by historical standards,” he added.
“Buyers, especially first-time buyers, with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates, have a window of opportunity,” said Lereah. “These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced.”
The Realtors® expect this year to end with 6.47 million resales, a decline of 8.6% from the torrid pace of 2005. A total of 6.40 million are expected in 2007, but “by the fourth quarter of 2007, existing-home sales will be 4.6% higher than the current quarter,” Lereah said.
Selling in a Soft Market — Your Builder May Have the Answer
“Whatever you’ve heard to the contrary, soft markets are not dead markets,” Harney tells consumers in his HouseKeys article. “People are selling houses successfully every day — nearly 6.5 million resales this year alone, the third highest annual resale total in American real estate history.”
Harney offers sellers these tips:
- Pricing realistically in a soft market is key. “Forget about what your neighbors pocketed during the glory days of the housing boom,” he says. “Selling prices are down in many markets, buyers are picky and asking prices need to be realistic enough that serious buyers shopping online or through newspaper ads will stop and think — wow, that’s an interesting deal for that neighborhood, that’s a fair price! Let’s take a closer look.”
- Presentation is key. Painting walls, installing new carpeting, landscape upgrades, “de-cluttering” decorations, rearranging furniture, other minor improvements or even a complete make-over may be recommended by the sales agent.
- Creative incentives may be necessary. These include contributions to the buyer’s closing fees, short-term “buydowns” of mortgage rates and even non-cash extras such as a free weekend at the buyer’s favorite resort.
- Your builder may have answers, too. “Builders are in the business of selling homes, week in week out, in good markets and tough markets alike,” he says. “Talk to your builder up front about the most effective ways to present and market your house. Most builders’ staffs have good ideas they can share with you. Some builders even have formal programs to help sell their buyers’ home. Be sure to ask.”
To read the latest issue of HouseKeys and for information on subscribing, click here.
For more information, e-mail Niki Clark at NAHB, or call her at 800-368-5242 x8061.