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Real estate insiders go bearish in blogs
In mostly anonymous postings, agents are reporting big problems in the markets.
NEW YORK (CNNMoney.com) - If the secret worries of real estate professionals are any indication, home prices could be heading for a swoon. When Brad Inman of Inman News, which tracks the real estate industry and is widely read by industry insiders, recently gave real estate agents the opportunity to blog about market conditions, they almost uniformly described them as bad – and getting worse.
"Normally, brokers and agents tend to sugarcoat the news; they don't want to affect consumer confidence," says Inman. "By letting them post anonymously, we gave them a way to really share their thoughts." Most responded with tales of high inventories, slow sales and languishing prices. Here's a sampling of their comments:
Inman grants that there could be an element of self-selection, with agents suffering a slowdown more inclined to vent. But usually, comments from posters tend to be very diverse, with no clear consensus. "This round of blogging," he says, "has been conclusive; no one said the markets are great." Stat support
Statistical evidence of a housing slowdown appears almost daily. On Tuesday, the Census Bureau reported that March housing starts were down to their second lowest monthly pace in the past year. So far prices have not suffered any notable decline - the median home price nationally in the fourth quarter was up 13.6 percent from 12 months earlier, according to the National Association of Realtors. Still, NAR chief economist, David Lereah, is on record predicting price appreciation will drop to the mid-single digits. And NAR has recorded an uptick in inventory, though not enough to be troubling. NAR spokesman, Walter Molony, characterizes conditions today neither as a seller's nor a buyer's market. "Probably, balanced is a better word," he says. "There has been a steady rise in inventory since last fall, but, broadly speaking, it's still a little tight." Rates are going up
What argues against any big fallout is that, absent a serious economic crisis in which unemployment spikes or wages plummet, real estate markets generally do not fall very far or very fast. But this time markets have to contend with rising mortgage rates - the average 30-year mortgage rate, at 6.49 percent, is now near a 4-year high, lowering home affordability. That will have a bigger impact in hot markets, where many buyers would not have been able to afford their purchases without resorting to financing through low-downpayment, low-interest ARMs (30 percent of recent sales or more in some markets). As rates rise, some could face close to a doubling of monthly mortgage payments. And if their home value has fallen, they could wind up underwater, owing more than their house is worth. How much potential for disaster there exists can be debated. According to Lereah, the next few years will feature a stable, more balanced, healthier market. Even some of Inman's bloggers are not totally bearish. One poster wrote, "Northern CA - oddly enough, higher priced inventory (luxury homes) still moving." Another one opined, "Wilmington, NC, market still active, except on barrier islands, where inventory of $300-500K condos over-supplied. . . . good to great condition, well-priced properties move quickly." Still, these shaky endorsements come nowhere near the unbridled optimism of a year or two ago. As for Inman, he sums up his blog-induced sentiments rather succinctly. "It scares me," he says.
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