Existing home sales plunged nearly 10 percent in February to their lowest level in nine years. It was the largest drop since July. Forty percent of those sales were on distressed properties. And new home sales are on track to come in at just 250,000 this year, the fewest since the Kennedy administration, when there were 120 million fewer people in the United States.
“What is discouraging in many markets is that it appears as if some of the local builders are creating the volume,” says Wayne Yamano, vice president with John Burns Real Estate Consulting.
Across the country, real estate agents are reporting a rise in traffic at open houses. But they say buyers are reluctant because of the shellshock they suffered after the free-money machine blew up in everyone’s face. The foreclosure epidemic. The plague of employment insecurity. The fear that the U.S. is on a downward slide. They’re all playing into buyer commitment phobia, brokers say.
There’s also confusion over the conflicting signals. Prices are low, but unemployment is high. Mortgage rates are attractive, but lending standards are strict. Renting is newly chic. “Everybody is now self-loathing about how we’re greedy Americans and we shouldn’t want to own homes,” says Jonathan Miller, CEO of real estate consulting firm Miller Samuel.
The U.S. will certainly have a spring home buying season this year. But even if sales rise as usual, they won’t pull the zombie housing market out of its stupor. Nationwide, forecasters expect house prices to drop at least 5 percent more this year. And no one in housing land is murmuring about anything like price stabilization until 2012. At least. “We don’t expect a dramatic rebound,” says Paul Ashworth, managing partner at Capital Economics. “We expect stagnation for several more years.”
The housing problems certainly aren’t easing. Foreclosures are expected to peak this year. A third of homeowners owe more than their homes are worth. Normally the number of people with negative equity is 5 percent. And strategic defaults, where people simply walk away, are rising.
The buying that is happening isn’t coming from first-time homebuyers. A recent study by Capital Economics found that 60 percent of sales are to foreigners and investors, most of them paying cash. In fact, in international real estate circles, the U.S. is viewed as the “new emerging market,” says Thomas M. Shapiro, president of global real estate investment firm GTIS Partners.