A housing market out of sync
Sunday, September 5, 2010
Jack Donnelly put off selling his Capitol Hill rowhouse for three years until he thought he saw glimmers of life in the housing market this past spring. At $950,000, he said, the red brick Victorian is a "solid deal."
Jackie Wright sees it differently. The row house is one of many homes competing for her attention in uncertain economic times. She's been looking to buy a home in the District since April but is in no rush to commit, partly because she thinks mortgage interest rates - and prices - could sink even lower.
As with many prospective sellers, Donnelly's hopes for his rowhouse were forged in the past, before the housing bust, when homeowners assumed that real estate prices would inexorably rise. They expected to reap vast windfalls when their houses sold. But Wright's eyes are turned to the future. She's anxious about whether the coming months will bring more gloomy economic news and reluctant to gamble on a major purchase, especially if a flagging market might actually mean better deals ahead.
"I keep thinking, 'Do I really want to do this now? Shouldn't I wait to see what happens in the next few months?' " Wright said.
Across the Washington region and around the country, the expectations of buyers and sellers are out of whack, thwarting deals that could potentially lift the U.S. housing sector from its long funk. The nascent rebirth of the market earlier this year proved to be a mirage.
Despite record-low interest rates, many would-be buyers are retrenching, hamstrung by meager growth in their wages, gripped by fears over the possibility of losing their jobs or another recession. Sales of existing homes plunged in July to the lowest level in more than a decade, and sales of new homes were slower than at any time since the government started tracking the data in 1963. The results were far worse than some of the most pessimistic economists had expected and added to the doubts nagging at Wright and other prospective buyers, even in areas such as Washington that have been relatively insulated from the housing bust.
There are now so many homes for sale, and so few of them are selling that, at the current sales pace, it would take over a year to clear the existing inventory on the U.S. market. That is more than double the time required in a healthy market and up significantly just since June.
"That's a powerful cocktail working against the housing recovery," said Mike Larson, an analyst at Weiss Research. "There's going to be a long-lasting psychological hesitancy for ordinary buyers to believe again in the dream of building wealth through homeownership."
The disconnect between buyer and seller was on full display last weekend at an open house to showcase Donnelly's home. The three-bedroom house, just up the street from Lincoln Park, had been on the market since early June, unable to snag a buyer in a crowded field of competitors. Within a quarter-mile radius, there are 11 other single-family homes on the market with similar prices as the summer selling season draws to a close.
As the open house entered its third hour, Leisa Hart, the real estate agent charged with selling the home, was pacing the living room, looking out the windows at the sidewalk expectantly. She had sent a mass e-mail to past clients, current customers and other agents urging them to take a look at the home. Her office manager at Long & Foster reached out to all the firm's D.C. offices and D.C.-licensed agents to stir interest. But the crowds never came, and the sales material sat mostly untouched on the granite kitchen counters.
"Where are my people?" Hart asked, shaking her head. "I put out an all-points bulletin. Where are they?"
Only eight parties showed up, walking past the balloons Hart had tied to the wrought-iron fence outside. Neighbors gardening in the yard next door glanced up to check out the rare visitors. One was Wright, who had been in the neighborhood meeting a friend when she spotted the for-sale sign. She quickly determined the asking price was too much.