Hat tip to DJ3 and JP for sending in this article by Nick on the slowing market – an excerpt:
Buyers “want to lock something in before the rate gets away from them,” said Brett Dickinson, a real-estate agent with Sotheby’s International Realty in San Diego.
To be sure, there is often a slowdown in real-estate sales between the summer and fall, as school starts up and families look to stay put. And some real-estate agents welcome a slowdown because it eases their fears that prices were rising too fast.
“The market is having a bit of a hangover. We partied pretty hard, and you can’t go on partying like that all the time,” said Greg Markov, a real-estate agent with HomeSmart International in Phoenix.
Some agents say the biggest problem in the market is “seller greed”—that is, sellers pricing their homes too high, said Jim Klinge, a real-estate agent in Carlsbad, Calif. Faced with rising rates, buyers aren’t going for higher prices. “They don’t realize our 12- to 18-month full-tilt boogie is over,” he said.
While higher rates and prices are knocking marginal buyers out of the market, others, like Ghalib and Nancy Wahidi, will remain in the market but look for a less expensive house. The Wahidis’ original price range topped out at $1.2 million, but they reduced it after rates went up, said Dr. Wahidi, a 38-year-old physician. They are set to close this week on a four-bedroom $1.03 million home in Ladera Ranch, Calif., around 4% below its original list price.
Sarah Withers and her husband accelerated their decision to buy a home in August after rates increased. She said they are willing to pay $1,000 to get out of their apartment lease, which runs through next April. Last week, they signed a contract to buy a three-bedroom townhouse for $115,000. After the house sat on the market for a month, the sellers reduced the price, drawing four offers.
“We don’t believe that the recent increases in mortgage rate are going to in any way, shape or form snuff out the housing recovery,” said Timothy Sloan, chief financial officer at Wells Fargo & Co., at an investor conference last week. It wasn’t logical, he added, to expect double-digit price gains to last forever.
http://finance.yahoo.com/news/home-sales-frenzy-eases-234100502.html
It was a race for a bit as savers saved up only to discover their 20% was now 15% and it didn’t matter as 100% (cash buyers) beat them near every time.
The saving grace (get it?) is having lost out any pause makes them the sellers/lenders new best friends.
Rates seem to be headed back down. Not 3.5% again but enough that the three demand/downpayment/rate curves will intersect favorably for these buyers.
Does make me wonder what happens to renters. Supply squeeze? Price war? My only tiny thought is that overbought bulk participants are going to take what they can and rent more and demand a bit less.
I hope they jack interest rates to the moon. This will flush out all the silly money floating around, put real food back on grandmas plate, and provide “cheap” homes for those that saved or those looking to buy investment properties.
Contrary to what the Fed tried to brainwash people with. There is nothing wrong with deflation. Unfortunately for everyone else the only group that loses in times of deflation are banks. This is why the Fed tries to tell you it’s such a bad thing.
high home prices are a matter of economic security.
Are incomes keeping pace? Some of my friends recently had their hours cut. Is there a trend that I am not aware of?
Yes, the rich have taken over.
My only tiny thought is that overbought bulk participants are going to take what they can and rent more and demand a bit less.
Agreed, and that goes for any seller or landlord.
What constitutes rich these days? 300K a year? 500K a year?
Rich definitely means more than $300k / year. My wife and I make that (put together) and we can’t even afford a reasonable house. As long as rents don’t skyrocket like they did in L.A. back in the late 90’s it’s all good.