Insiders Pessimistic About Housing Market

If the secret worries of some real estate professionals are indicative of things to close, median home prices could be heading for a real downturn, according to CNN Money.

Brad Inman of Inman News, which tracks the real estate industry online and is widely read by insiders, recently gave agents the opportunity to blog about U.S. housing market conditions. They almost exclusively described them as bad, and getting worse by the month. Inman believes the chance for anonymity allowed the agents to let down their typical, overly-upbeat guard.

“Normally, brokers and agents tend to sugarcoat the news. They don’t want to affect consumer confidence. By letting them post anonymously, we gave them a way to really share their thoughts,” Inman said.

A sampling of their comments, which mostly contained tales of high inventories, slower sales and stagnating prices:

• “Portland, Oregon is mixed… more inventory, sitting longer… Sellers no longer king.” — Anonymous
• “Minneapolis/St.Paul… 15 houses per buyer. If we had buyers. Huge inventory in every price range. More foreclosure properties coming on daily.” — Anonymous
• “East Central Florida Coastal area inventories up four times year to year and sales down 75 percent.” — Ramon Rivera
• “Some Realtors, mortgage brokers and clients have been more testy than in months previous. Something is in the air.” — S. Crowe.
• “In Northern California, let’s not beat around the bush. There is a slow down! Home prices are not going up. Sales are down.” — Anonymous

Inman acknowledges an element of self-selection, with agents suffering a slowdown more inclined to vent. But comments from posters tend to be very diverse, with no clear consensus. Not this round.

“This round of blogging has been conclusive; no one said the markets are great,” Inman said.

Statistical evidence of the housing market and where it’s going appears almost daily. Most of it hasn’t been rosy. On Tuesday, the U.S. Census Bureau reported that March housing starts were at their second lowest monthly pace in the past year. Prices have not suffered a notable decline thus far (the median price in the fourth quarter was up 13.6 percent from 12 months earlier, according to the National Association of Realtors).

Still, the Realtors’ chief economist, David Lereah, is on record as saying that price appreciation will drop to the mid-single digits, and inventory is on the uptick.

The argument against any big fallout is that, aside from a serious economic crisis in which unemployment spikes or U.S. workers’ wages plummet, real estate markets generally do not fall very far or very fast. But markets have to contend with rising Florida mortgage rates, which hit a four-year high of 6.49 percent last week, drastically lowering home affordability.

That will have a bigger impact with the South Florida housing market and other hot markets, where buyers would not have been able to afford their purchases without resorting to financing through low down payments and low-interest ARMs. As the Florida home loan market get more expensive, some could face close to a doubling of monthly mortgage payments. Worst case? They could wind up with negative amortization, owing more than their house is worth.

The extent of the potential downturn continues to be debated. According to Leerah, the next few years will be a stable, balanced, healthier market. Still, shaky endorsements such as Leerah’s come nowhere close to the unbridled optimism of a year or two ago.

“It scares me,” Inman said.