It appears that mortgage rates fell for the 5th week. Match that with home sellers looking to entice buyers, and I think we have a scenario where we are experiencing a housing crunch. The bubble has popped.
In the past 18 months, the housing market has lost a lot of air. Many of those in the housing market are using words different words to describe the scenario, such as “transitioning” or “stabilizing”, to describe a soft housing market. Of course, these words are used by real estate agents, mortgage lenders, and home builders. Who else?
There is one real estate coach saying the signs are bad. Jim Crawford from Atlanta says “It’s a buyer’s market without buyers”. 36 markets are down out of the 40 top markets. As an example, Atlanta has 114,000 homes listed for sale where they usually only have a maximum of 52,000. Homebuyers who want to sell their home to move into a new one can’t, because someone needs to buy first.
So what are big home builders doing?
Well, to avoid setting off a domino effect of lowering prices, they have increased incentives to attract buyers without reducing the price by face value…but we are all smarter than that….prices ARE going down.
Incentives that are being covered are such things like covering closing costs, paying for upgrades or buying down mortgage points. But the dollar price for items to giveaway has gone up over the past few months. Last year maybe giving away a big-screen TV would have been a great incentive. Now…builders are having to take off $40,000 to $50,000 off landscaping, new appliances and even 1.5 points by going through their mortgage company.
Selling a home is even being more competitive because foreclosures are on the rise, in volumes. Because of the added competitiveness, some sellers and their real estate agents are edging up commission splits to work in favor of the seller by enticing the buyer’s agent.
I see stormy seas ahead as this is only expected to be the beginning. A lot of home loans are expected to re-adjust in this year and next. We will see what happens next.