Tension, Desperation Setting In For Some Sellers
Across the country, home sellers are having a rough go of it. How bad has it gotten? Take the case of Margot Ray, a saleswoman in California, who put her 5-bedroom, 3-bath house on the market in February for $480,000. There it sat, along with about 3,000 other homes for sale. She dropped the price to $465,000 in April.
Nothing.
“We’d have an open house and maybe one or two people would come by. I had an open house where nobody came,” Ray said.
In July, she had an epiphany — advertising on the radio! She bought some air time and an ad that put the house on the map. Now agents remember the address. The price is down to $427,000 and 15 potential buyers showed up during a recent open house.
Still nothing.
With two kids in college and a new house with its own mortgage loan, Ray is starting to feel the heat. Is she at the point of desperation? Not yet, she says, but adds succinctly that she wants this house sold. Promptly.
Just last summer, houses in desirable neighborhoods (and beyond) sold in a day. Seasoned and first-time buyers alike were engaged in bidding wars, driving up prices astronomically. Sellers in some markets even haggled agents’ commission. Forget about that now. Nationally, 39 percent more homes (excluding new construction) are on the market than last year this time.
As a result, real estate agents are giving stunned sellers crash courses in marketing. Agents now command the full traditional 6 percent commissions — sometimes more — if only to use most of it as bait so they can offer up to 4-5 percent to a buyer’s agent for a successful sale.
In the toughest markets — which includes most of South Florida, Detroit, Atlanta, Dallas, Stockton, Sacramento and San Diego — incentive is the name of the game. One Florida agent offered a Mercedes-Benz with a house sale. Others are even dangling vacations or gift cards worth thousands of dollars in gas.
It sounds desperate because it is. Conditions aren’t conducive to selling homes otherwise. The National Association of Realtors reported last week that a surprising 26 of 151 metro areas experienced outright price declines in the second fiscal quarter. In the case of condos, 1 in 4 metro areas reported a decline in prices.
“We have sellers not only competing with an onslaught of resale houses on the market, but we also have home sellers competing with new developments, where they are offering tens of thousands of dollars in incentives, or even making mortgage payments, buying down loans, putting in swimming pools or paying points,” said Raylene Miller, a real estate agent.
Locally, speculators have driven up real estate prices rapidly from 2001-2005. Now they’re bailing fast, and the sudden abundance of inventory combined with a steady rise in Florida mortgage rates over the past nine months has been too much for the market to bear.
New home sales — which comprise about 15 percent of the market — have declined 12 percent this year. It’s starting to trickle down through the economy, too. Pessimism among more than one major home builder has grown rampant, according to Paul Lopez, a spokesman for the National Association of Home Builders.
In July, the National Association of Home Builders‘ monthly survey of builders got 369 responses, 75 percent of which said they’re offering upgrades like hardwood floors, granite countertops, high-end appliances, pools, garages or other freebies to new-home buyers.
That’s 25 percent more than last year. In January, the NAHB survey revealed that 31 percent of builders were paying buyers’ closing fees, and 15 percent were somehow helping with financing.
What this means for buyers is: make your move! Florida home mortgage borrowing costs have declined for four consecutive weeks now, and sellers are pulling out all the stops. Some shrewd negotiating could put you in the driver’s seat. Take advantage of this opportunity!
