Noticed a lot more “For Sale” signs around lately? Welcome to the new reality in the housing market. We are officially in a slump.
Reports Business Week:
The housing market turned in one of its worst performances in years, with existing-home sales falling 7%, to an annual rate of 6.7 million in the second quarter, according to data released on Aug. 15 by the National Association of Realtors. The results show a clear bifurcation in the market. States that had seen a big run-up in home prices are experiencing the most dramatics sales declines, while markets with strong economies and lower-cost housing are still seeing sales increases.
“There’s a lot more merchandise and tremendous amounts of price reductions,” says Phyllis Haber, a realtor with Prudential Douglas Elliman on New York’s Long Island. “It’s crazy. It’s like someone waved a wand and everything changed.” New York saw sales drop 4.8% year over year.
The big losers include California, Nevada, Arizona, Florida, and Virginia. All of the states saw sales fall by more than 20% from the same period last year. In the once red-hot Southern California market, sales of new and previously owned homes fell 27% to 22,700 in July, according to market researcher DataQuick. That was lowest number of homes sold since July, 1997.
Hold on a second. Did they say Virginia? Yep. Most of that slump is in Northern Virginia but the trickle-down effect takes over here as well. Local Realtors tell me houses in Floyd County can be on the market for a year or more unless owners are willing to drop their asking prices. Just a few months ago sellers could expect to get more than their asking prices as bidding wars erupted over desirable properties.
In Northern Virginia, where we sold our condo in two days in 2004, properties may be on the market for six months or more and the final sale price is often below what they seller wanted.
Reports the Ithaca Journal:
For years, nothing seemed to faze home buyers (in the Washington area). Price didn’t matter. You could sell with dirty dishes still stacked in the sink. Even the eyesores got multiple bids.
In the past year, though, the number of homes on the market has tripled. Some sit for months instead of days. To sell, the experts say, the price has to be right and the house has to look move-in ready.
The boom had to come to an end eventually. The real estate market has spiraled out of control with prices going up daily and overly-ambitious buyers using interest-only loans to buy homes they couldn’t afford. In Loudoun County, Virginia, home foreclosures are up 40 percent and we’re not talking about families eeking by on $25,000 a year but high-income homeowners with six-figure incomes and adjustable-rate mortgages they can no longer afford.
From WTOP Radio in Washington:
Homeowners who have adjustable rate mortgages are in for a shock in the next few months as the ARMs they took out three to five years ago end and higher mortgage payments kick in.
“There is sort of a day of reckoning coming,” says Steve Sacks of Rockville’s Rydex Investments.
“It’s estimated the average American’s home payment could go up anywhere from 25 to 50 percent.”
The Washington area could be hard hit since a lot of folks opted for adjustable rate mortgages because that was the only way they could afford mortgage payments.
Sacks says some consumers who are already stretched thin may be in trouble, especially since interest rates are rising and household debt is higher than ever. Already mortgage foreclosures are rising.
The higher interest rates come as median home prices have declined for the first time in the past five years in parts of the metro area, and as home sales cool down in Virginia.
Fairfax and Loudoun counties have seen declines, according to The Washington Post.
Meanwhile, the Virginia Association of Realtors reports that the number of closings on sales was down 18.99 percent in June compared to May, and 15.28 percent for the year-to-date compared with last year.
Last month there were 12,577 closings. In June 2005 there were 15,526.
In addition to declines in northern Virginia, the association says lower sales were reported in Hampton Roads, the Dan River area, the Massanutten area, the Winchester/Front Royal area, Fredericksburg and the Greater Augusta area.
Areas where home sales increased last month include Lexington, Harrisonburg, Charlottesville, Lynchburg, the New River Valley, the Roanoke Valley, the Eastern Shore, the Chesapeake Bay area, Richmond and southwestern Virginia.
OK. Sales are up in Southwestern Virginia. That can be good news or bad news, depending on your point of view.
But things are even worse elsewhere according to Foreclosure.Com:
— Michigan currently has the highest new foreclosure rate per household,
with one in every 1,085 homes currently in foreclosure. This marks
the highest foreclosure rate for a state this year.
— California’s new foreclosures dipped by 41 percent from June to July,
while the active inventory increased by 7.3 percent.
— The largest monthly increases in new foreclosure rates were recorded
in Alabama (+21.3); Colorado (+12.9); Illinois (+11.6); Michigan
(+38); Minnesota (+31.1); Missouri (+48.2); and Ohio (+14.3).*
— The largest monthly percentage decreases in new foreclosures were
found in California (-41.3); North Carolina (-14.3); Pennsylvania
(-21.3); and Texas (-16.9).*