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 Posted: Sat Oct 11, 2008 4:13 am Post subject: its the demand side stupid, and no bailouts have addressed t |
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http://biz.yahoo.com/cnnm/081010/100808_financial_crisis_pulling_out_of_home_sales.html
Homebuyers balk amid Wall Street meltdown
Friday October 10, 11:26 am
ET
By Les Christie, CNNMoney.com staff writer
The Dow has lost over 2,200 points in the last seven trading sessions
- and that>s giving the few homebuyers that are out there right now
reason to reconsider.
The National Association of Home Builders (NAHB) for instance has seen
its contract cancellations spike recently to as high as 30%, compared
with an average rate of about 20%. During the housing boom, as few as
5% of sales were cancelled.
"The events of the past couple of weeks have people>s heads spinning,"
said Steve Melman, NAHB>s director of economic surveys.
The National Association of Realtors (NAR) estimates that there are
about 25% fewer people shopping for homes than there normally would be
at this time of year. Potential buyers are worried about their jobs,
their declining investments and falling housing prices, which is
keeping them on the sidelines, according to spokesman Walter Molony.
"You have to have a lot of confidence to make this kind of big-ticket
purchase in the current environment," said Molony.
Real estate agent Bob Rose was helping one couple look for an
investment property in battered Contre Costa County, hoping to find a
bargain that they could sell in a few years.
Then, on September 29 the Dow dove nearly 800 points and the couple
decided not to buy. "They told me they had lost about a quarter of
their retirement portfolio," said Rose, and that they could no longer
afford it.
Even some buyers who are already in contract are managing to pull out
of sales amidst all the economic turmoil.
Deal or no deal
Two weeks ago, one Washington state couple, Sharif Tai and Gaby
Ghafari, went into contract on a new $450,000, three bed, three bath,
house in central Seattle. Soon afterwards, the stock market began its
steep descent.
"It wasn>t that we lost money [in the market] or that we were worried
about our jobs," said Tai, a software developer in his mid-20s, "but
we thought we could get a better deal, so we decided to wait."
The couple backed out of the deal by citing problems with the
inspection, but they haven>t given up on making a purchase.
"We>re keeping our eyes out," said Tai. "We want to see how things
shake out. If we see a great deal, we>ll take it."
Other buyers are demanding sweeteners before they close a deal during
such a rocky time. San Francisco agent Jim Holt had clients go into
contract on September 29, on a $750,000 home in town. But by the end
of the week the Dow had lost over 800 points and the buyer demanded a
whopping $50,000 price cut.
"Buyers are seeing the [market implosion] as an opportunity to get
concessions," said Holt. In the end, the seller only agreed to reduce
the price by $5,000 - but that>s better than nothing.
Other house hunters are managing to wring more concessions out of
sellers even on top of existing discounts.
Rich Machado, an agent with the Smart Homebuyer Team in New Bedford
Westport Mass., had already helped one buyer get a seller to take
$9,000 off the price of a house listed for $229,000, and throw in
$6,000 in closing costs, $1,800 for an electric upgrade and $400 for a
home service contract.
The deal went into contract two weeks ago, but despite that impressive
array of incentives, "the buyer is balking," said Machado. "He>s
asking for another $10,000 off the price."
The seller hasn>t caved in yet - but with demand drying up, he may be
forced to come around.
As the losses mount on Wall Street - the Dow lost 678 points on
Thursday alone - things will undoubtedly become even more difficult
for sellers.
"In the midst of such chaos, everyone is just shaking their heads,"
said NAHB>s Melman." |
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