Home Buyers in Charge
With inventories of unsold homes piling up, sellers are offering TVs and other perks and dickering on price.
In residential real estate, a buyers' market has arrived. Las Vegas agent Robyn Wilson, with Re/Max Elite, is giving away a plasma TV to anyone who buys a house through her. The builders of The Towns at Fells Point, an upscale development near Baltimore's harbor, are offering to pay buyers' gas and electric bills for two years. Sheila Anderson, a ZipRealty agent in once-white-hot San Diego, says she dares not counter low offers from prospective buyers too aggressively. "We don't want to scare them away," she says.
Recent sales statistics mark a definite turn. Nationally, prices for existing homes declined in August compared with the same time in 2005. Although prices dropped less than 2%, it was the first decline in 11 years. If houses aren't exactly bargains yet, they're headed that way. In October, the prices of 46% of the homes for sale in the Boston area had been reduced; in April, the figure was 36%. In Phoenix, 41% of homes were marked down in October, compared with 30% in April.
Some seers think the buyers' advantage will widen. Moody's Economy.com now forecasts price declines, measured from the peak of each market to its projected trough, in 100 metro areas. Some 20 markets, mainly in Florida, California and Nevada, could see double-digit-percentage declines. Moody's expects average prices to fall 19% in Cape Coral, Fla., 17% in Reno, Nev., and 16% in Stockton, Cal.
This trend may not mean a collapse of sellers' resolve to hold the line on prices, however. After refinancing many times, taking out equity, many people don't have much wiggle room to reduce their asking prices. It's the same for sellers who bought close to the market peak who can't afford to accept less than they owe.
And there are markets where home values aren't falling much -- or at all. It looks as if sky-high prices will remain in Silicon Valley, for instance. And few midwestern markets saw home-price increases that were out of whack with historical norms, so there's less risk of big price drops now.
Price breaks or no, buyers almost everywhere have more homes to choose from. The inventory of new and existing residences for sale is piling up. At nearly four million, that's a record and double the number at the start of this decade. At current sales levels, it would take six months to sell all the new homes on the market and seven to move all the existing ones.
That means buyers should take charge. When you find a home you like, try offering 10% below the asking price. And don't stop there. Ask for warranties to cover the roof, say, the plumbing and electrical systems, and even appliances. If you need more time to get financing, ask for it. While you're at it, ask the seller to pay some closing costs. Above all, don't feel rushed or pressured. These days, dream houses are like buses: If you miss one, another will be along in a minute.