The news is better for house buyers than it is for sellers.
But those trying to sell a home have some reason for optimism
As 2006 draws to a close, homebuyers might have more to celebrate than just the new year, as market conditions continue to move in their favor. In October, the nationwide median sale price for an existing home was $221,000, down 3.5 percent from $229,000 in October 2005. And in late November, the average interest rate for a 30-year mortgage dropped to 6.14 percent—the lowest since January, according to Freddie Mac.
Today’s housing situation is the first real buyer’s market since the early 1990s, according to Walter Molony, spokesman for the National Association of Realtors. A recent NAR report indicates that the market has stopped its decline and is leveling off, but buyers needn’t worry about an imminent return to the inflated housing prices of the last few years. According to Molony, the slowing market means sellers are more inclined to negotiate prices and terms. During the boom period, “sellers had no incentive to offer incentives,” he says. Now flashy perks, such as plasma TVs, new cars, vacations, and help with the down payment, make listings stand out, as do prices and terms.
While sellers might lament the current conditions and the “corrections” in housing prices in many metropolitan areas—that’s NAR-speak for price drops—”What we’re seeing now is a return to normal market conditions,” says Molony. Further, a recent NAR report indicates that a steady pace of home sales can be expected in the next two months. “It’s important to focus on where the housing market is now—it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high—they’ll stay that way through 2007,” said the NAR’s chief economist, David Lereah, in a recent release.
Tempering Lereah’s upbeat outlook is the National Association of Home Builders/Wells Fargo Housing Market Index for December, which measures how builders perceive the housing market for the next six months. The index is at 32, far lower than the 57 points of a year earlier. (Figures below 50 indicate that sales conditions are considered poor.) What’s more, according to the U.S. Census Bureau and the Department of Housing and Urban Development, sales of new single-family houses have declined to a seasonally adjusted rate of 1,004,000 in October, down 3.2 percent from the month before and 25.4 percent from the October 2005 estimate. The result is that there’s a 7-month supply of new homes for sale compared with 41/2 months a year earlier.
If you’re planning to sell your home, it might pay to wait until later next year. The combination of seller flexibility and low mortgage rates will encourage buyers, resulting in increasing sales.