June 28, 2006 (Bloomberg) -- Ko Ueno, a 36-year-old tourism executive moving to San Diego, hasn't found a buyer for his one- bedroom condominium in Cambridge, Massachusetts -- even after cutting the price three times since October and offering a $6,000 cash rebate.
``A year ago, this unit would have gone in a matter of days, but now we have to offer incentives and a brand-new kitchen,'' his broker, Brenda van der Merwe, says as she inspects the kitchen's freshly painted walls.
Ueno, whose apartment near Harvard University went on the market for $329,000 and is now listed at $299,000, is caught in the first U.S. housing decline since 1999. Gone are the bidding wars that drove prices to record highs in each of the past five years. Now buyers have the upper hand, and are waiting for sellers to drop their prices and throw in such extras as country club-memberships and reimbursement for moving costs.
Sales of existing U.S. homes fell in May to an annualized rate of 6.67 million as higher mortgage rates sapped demand, the National Association of Realtors said yesterday. With the Federal Reserve poised tomorrow to raise its benchmark rate a quarter- point to 5.25 percent, according to all but two of the 126 economists surveyed by Bloomberg News, things are likely to get worse before they get better.
``The housing market isn't just cooling, there is a decided chill in the air,'' says Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``Market power is shifting from sellers to buyers as unsold inventories continue to rise.''
`Skunked'
The Washington-based realtors group said the number of unsold homes rose to a record. The U.S. Northeast had the biggest sales drop, falling 4.2 percent to an annualized pace of 1.13 million, the trade group said. The region is losing an average of 247,000 residents a year, the biggest annual outflow in the U.S., the Census Bureau said in an April 20 report.
Sales in the Midwest declined 3.8 percent, the West was down 0.7 percent, and the South fell 0.4 percent.
Many sellers are finding they must cut their initial asking prices by 10 percent or more to entice buyers, according to brokers. Real-estate agents sound more like car dealers as they use phrases like ``cash back,'' ``buyer rebates'' and ``must sell.'' They speak of being ``skunked'' at open houses -- meaning, no one showed up, even after the sellers made ``price improvements.''
``I've learned to bring a good book with me,'' says Christopher Rotondo, 32, an agent with Watermark Realty, as he sits alone at an open house in Newport, Rhode Island. ``Last year, we'd typically get 20 to 30 people. You needed an assistant to direct traffic and hand out brochures. Now, more likely, it's three or four people, and sometimes you get skunked.''
Hot Tub and Skylights
The 1,470-square-foot townhouse near Goat Island has a new kitchen, a ``spa room'' with a hot tub and skylights, refinished pine floors and a new kitchen. It came on the market in February for $479,900, was reduced in March to $464,900, and again in May to its current asking price of $449,900. Three people came to the two-hour open house June 25, Rotondo says.
The Federal Reserve wanted to take what former Chairman Alan Greenspan called ``the froth'' out of the real estate market as a side campaign in its war to contain inflation. Policy makers have raised borrowing costs 16 times since June 2004, pushing mortgage rates to a four-year high in May.
To read the rest of this article please visit the link below.
Home Sellers Cut Prices as Once-Torrid U.S. Market Turns Chilly
This article is copyrighted material from Bloomberg, L.P. |
