Buying on Their Own Timetable
Buying on Their Own Timetable
Buyers ignore negative accounts of housing conditions; they'll buy when they're ready.
BY ROBERT FREEDMAN
Beth Lassner had read articles in her local paper and heard reports on the radio about the bursting of the housing bubble, but none of that stopped the recent college graduate from buying a condo just outside Boston and becoming a first-time home owner.
“I wasn’t affected by anything that was said, because I was ready to buy," says Lassner, who works in sales. “I had the money, and buying was what I wanted to do."
In Boston and other markets that were hot during the housing boom, such as Alexandria, VA., buyers are moving forward on their purchasing plans and not letting negative media coverage about market slowdowns dictate their decisions.
“I work with a lot of first-time buyers, and they’re keeping their eyes on the long-term perspective," says Claire Maucieri, a sales associate with Long & Foster Real Estate in Alexandria. “They’re eager to be done with renting so that they can focus on what they want to do with their house, such as paint or customize it. They don’t feel they’re paying too much."
The story might be slightly different for move-up buyers. “They’re more likely to react to negative news," says Nancy Wright, ABR®, CRS®, of RE/MAX Realty Brokers in Pittsburgh. “They’re not honeymooners who are waiting to have their first baby."
But even among those buyers, not everyone is sitting out the market until the news turns positive. “You have some who aren’t nervous about buying now," Wright says.
Good Reasons to Buy
When home sales on a national basis started slowing in the first quarter of 2006, the conclusion of much of the national media coverage was that a bubble is bursting. “It’s really no different from the dot-com bust," an April 2006 article in the Wall Street Journal quotes one person as saying.
NATIONAL ASSOCIATION OF REALTORS® leaders have consistently called such views misleading, because they apply what’s going on in a few struggling markets to a national trend. “Contrary to many reports, there isn’t a national housing bubble," 2006 NAR President Thomas M. Stevens, said late last year. “After five years of outstanding growth, the housing market is undergoing a period of adjustment and becoming more balanced between buyers and sellers."
In fact, existing-home sales rose 0.6 percent to a seasonally adjusted annual rate of 6.28 million units in November from a level of 6.24 in October. “Existing-home sales should rise gradually during 2007," says NAR Chief Economist David Lereah.
Before the shift, prices had indeed risen dramatically in many markets, primarily those like San Francisco, where high demand has been coupled with limited inventory. In the Bay area, for example, appreciation topped 28 percent between 2003 and 2005, according to NAR data.But many real estate professionals believe that analysts in the media have been too quick to call the housing market change a bust. What the market shift really represents in their view is a welcome return to more normal times.
“The media have been painting with too broad of a brush," says Robert Imperato, CRB, CRS®, of Boston Realty Associates in Boston. “What you have to look at is the historical curve. Right now, with lots of inventory and interest rates still extremely low, conditions are terrific for buyers."
For the typical buyer, that message is getting through. A poll of 2,000 households in the third quarter of 2006 by the National Association of Home Builders found that more than 80 percent were confident the value of their home would rise during the next five years, and slightly less than 70 percent said their home remained their most valuable investment.
Housing Still Seen as Solid Investment
What makes the findings striking is that the poll was conducted at a time when home appreciation on a national average basis took a rare dip into negative territory. Third-quarter appreciation for existing single-family homes slipped to a negative 1.2 percent to a median $224,900 from $227,100 in the second quarter, according to NAR data.
“Despite the current housing market downturn, Americans resoundingly believe that buying a home is the best investment they can ever make," 2006 NAHB President David Pressly says.What’s more, consumers like Lassner aren’t letting the negative media coverage influence the timing of their buying. In the NAHB poll, slightly less than 50 percent of the households surveyed say the media have no influence on their plans whatsoever, compared with just 19 percent who say the media play an important role.
In Lassner’s case, the timing of her needs trumped anything the media said. “The negative coverage was definitely something I thought about, but I wanted to get out of the rental market," she says. “I did a lot of reading to see what the average price was, and I saw that everything was going down somewhat. I spent a little more than I planned to, but a year earlier the seller had turned down an offer that was $30,000 more than mine, so I think I got a good value."
Buyers in the NAHB survey say price is key. Fully 80 percent called price the No. 1 consideration in buying, followed by slightly less than 70 percent who said interest rates are also key.
On the basis of where prices and appreciation rates are heading, the prospects for housing at the beginning of 2007 are looking good. That’s because an ample supply of homes, after years of overly tight inventories, is helping keep prices from heading up too quickly from the current lull. As of early December, NAR was reporting a 7.4-month supply of homes available for sale, a far cry from the 4.9-month supply just a year earlier. That means inventory is closer to historical norms than it has been in the past couple of years. The supply offers opportunity to buyers who would have had to stretch to buy during the boom years.
Buyer's Market Won't Last Forever
And interest rates remain at historical lows. In mid-December the average 30-year fixed-rate mortgage stood at 6.13 percent, according to Freddie Mac data.
NAR touted such favorable market factors in its “Buy Now" advertising campaign, which launched in November. Ads appeared in such national newspapers as the Wall Street Journal and USA Today.
Yet the ample availability of inventory might not last too long. “This window of opportunity [for price-conscious buyers] will continue into the new year, but inventories are starting to decline," says 2007 NAR President Pat Vredevoogd Combs. “Sellers will be less willing to negotiate when conditions begin to balance in most areas around early spring."
That said, households in some of the country’s hottest markets during the boom, particularly those that saw big influxes of investors who bought to flip their property for quick profit, will likely remain out of the market in large numbers until prices have further stabilized. Lereah estimates that a quarter of all markets fit this description.
But in most markets, buyers are confident and looking to buy. “The nice thing is, the cooler market is working in buyers’ favor," says Maucieri, the Long & Foster associate in Alexandria. “Buyers don’t have that panicked feeling they had two years ago. They can negotiate with the sellers, and, if a particular deal doesn’t work out, they can walk away feeling better than they did when everyone was caught up in the fervor during the boom."