Home Sales slowing down!

Selling a house the past few years has been easy. Put up a "For Sale" sign. Host an open house. Sift through multiple offers. Pick a buyer willing to fork over more cash than you initially asked for. Then brag about how much you got.

That was then. And now? While there's still a plentiful pipeline of homebuyers looking to make a deal, finding one willing to make a split-second decision to buy and pay whatever it takes to get in the door is no longer a lock, real estate agents say.

In what could signal a mood shift in the feverish real estate market, tales of bidding wars and 30 percent annual price gains are quietly fading. Instead, there's nervous chatter about the recent increase in the number of homes for sale, sellers cutting their asking prices and builders wooing buyers with incentives.

The reason: There are signs that the overheated market might finally be cooling. The Commerce Department, for example, said sales of new homes in September fell shy of expectations, median prices declined 5.7 percent, and the number of new homes for sale shot up to a record 493,000. Freddie Mac also said October mortgage applications seem to be "tapering off."

It's not just the megahot markets such as New York City, San Diego and Phoenix showing stress. Softness is also being reported in condo-happy Las Vegas, the stalled auto capital of Detroit and Midwest college towns such as Madison, Wis.

Most real estate agents and economists are not forecasting a real estate collapse, although some doomsayers say the bursting of the "bubble" is inevitable. Instead, they say the temperature of the housing market is dropping from an unhealthy 104.3 to a reading closer to the norm of 98.6.

"The market is leveling off, but it's not like there's a huge crash going on," said Pam O'Connor, CEO of Chicago-based Leading Real Estate Companies of the World. Adds California-based agent Toni Martinez: "More buyers want to sleep on it before making an offer."

Richard DeKaser, chief economist at National City, said the five-year housing bull run peaked this summer.

"What we will see is a dramatic slowing in price appreciation," he said. Only a few high-risk markets will experience price declines, he predicts.

Once white-hot San Diego county is a test case. Home sales there fell 4.7 percent in September from year-earlier levels, and price appreciation slowed to 3.8 percent, said DataQuick Information Systems. Despite the pullback, DataQuick analyst John Karevoll describes the market as "stable" and "more normal."

Other signs of a slowdown:


Ricardo Cortazar, a Realtor in Tempe, Ariz., said it now takes 35 days, on average, to sell a home. Six months ago, it took a week. Inventory in Arizona has swelled to 15,000 homes, vs. 6,000 in May.


Vaughn Bryan, a real estate agent in San Bernardino County, has spotted another ominous trend: a rise in the number of 90-day listing contracts that expire without a sale.


Dan Elsea, a Detroit Realtor, said it's common for sellers in the job-starved Motor City to reduce their asking prices two, three or four times before signing a deal.

Agent angst

Signs of cooling have created angst among real estate agents.

"You now have agents in the office walking over to other agents asking, 'Why has this property not sold?' " said Martinez, an agent at Century 21 Lois Lauer Realty in Redlands, Calif.

Much of the perceived softness must be kept in perspective, argues J. Lennox Scott, a Seattle-based broker who said business remains robust, citing price gains of 16.3 percent in September, vs. a year ago. What looks ominous is less so considering fresh numbers are being compared with record highs. "Homes continue to sell briskly," he said.

An existing home that sits on the market for four months is not uncommon when compared with long-term housing data, said National Association of Realtors spokesman Walter Molony. A nationwide supply of homes that would take six months to sell is considered healthy. There is now a 4.7-month supply, up from 4.3 in May, the NAR said. In the 1990-'91 recession, supply hit nine months.

Business is slowing, but not enough to create a true buyer's market. High-end properties and the more speculative, investor-driven condominium market are under the most pressure. The Florida condo market, suffering from oversupply, overinflated prices and speculation, is prone to price declines of 20 percent to 30 percent, said Jack McCabe, a Deerfield Beach housing consultant. In Miami-Dade and Palm Beach counties, 11,465 units are under construction, permits for another 14,500 have been OK'd and plans for another 36,000 have been announced. Prices are "changing as we speak," he said.

The pricier end of the market suffers more from sticker shock.

"Homes in the $1 million to $2 million range in hot metro areas are more vulnerable," O'Connor said.

Buyers cautious

To sell, homes have to be priced right. Many potential buyers, their confidence shaken by high oil prices and hurricane fatigue, have turned cautious. They're leery of overpaying amid predictions of an impending downturn.

Interest rates also have been creeping up. Freddie Mac said the average 30-year fixed-rate mortgage is 6.15 percent, up from 5.64 percent a year ago, making monthly payments less affordable. The average monthly mortgage payment in Southern California in September was $2,034, $30 below the April 1989 peak but up 50 percent from 2000, Data-
Quick said.

In another subtle shift, many people looking to buy who might have rushed a few months ago to avoid paying even higher prices, are now waiting for prices to decline.

Take New Yorker Carl Haacke. He wants to move, but is in no hurry to make a bid on the elegant Brooklyn brownstone he covets. Instead, he's watched the asking price drop $200,000 from its initial $1.7 million. He figures if it drops once, it's likely to drop again.

"That's my incentive to wait," he said.

If that strategy becomes the norm, more sellers will lower their prices to lure buyers back into the market.

Bubble theory proponents say it will end badly, with sharp price declines and intense financial pain such as investors suffered after the tech stock bubble burst in 2000.

But for that to occur, it would take a dramatic rise in interest rates or a major shock to local economies resulting in steep job losses, argues Mark Milner, chief risk officer at PMI Mortgage Insurance, a Walnut Creek, Calif.-based provider of mortgage insurance.

Both bulls and bears have evidence to back up their predictions. Much -- but not all -- of current data show sales volume and price gains are still healthy, suggesting no danger of an imminent collapse.

September existing-home sales came in at their second-best level ever, although sales were boosted by heavy buying in the Gulf Coast region after Hurricane Katrina, the NAR said. In early October the NAR said its "pending home sales index" set a new record. The national median price of a home was $212,000 in September, up 13.4 percent from a year ago -- but down from $220,000 in August.