Concern over rising energy prices and a lack of urgency to buy in a declining home price market has real estate agents reporting declining homebuyer traffic and prices.
But even when buyers are on the market, they face difficulty obtaining financing, according to Credit Suisse’s monthly survey of real estate agents.
The weak ending to the spring selling season is not good news as agents prepare for summer, generally the busiest time of the home selling year.
The survey’s price index dropped more than five points to 27.4 in May,
“We think that the sharp drop in the price index reflects a realization among sellers that they must lower the price if they want to find a buyer before the season ends,” Oppenheim wrote.
Buyers have the same mentality and while some agents reported moderate traffic, few offers were being made. As one Minneapolis agent put it bluntly, when buyers do make offers, it’s often well below list price.
“Everyone has been blaming the lack of a spring market on the weather. Face it...There are very few buyers out there willing to pay the over-inflated prices that sellers want to charge,” the agent said. “I had a listing receive three offers on day number two on the market. Everyone knew it was a multiple offer situation. The best offer came in 20% under list. The home was already priced aggressively and not a single one of the offers would negotiate up. This was on a $250k house! That sums up this market. There are a few shoppers, and even fewer good buyers!”
Further complicating the buying process is the inability to obtain financing—even the 3.5% required for a mortgage insured by the Federal Housing Administration is frequently an issue. “The financing issues are a key part of keeping many potential buyers in the rental market,” Oppenheim wrote.
“My traffic has slowed down because people don’t think they can qualify for a mortgage under the stricter lending standards,” reported an agent in Dallas—an area that has weathered the housing downturn relatively well.
The financing issue is no better in markets with concentrations of distressed properties.
“REOs make sales more difficult to close. Why are banks dragging their feet?” asked an agent in Miami. “To sell their portfolios’ REOs, it is necessary to have mortgage companies approve buyers in a more expeditious way.”
The impact of rising fuel prices on personal budgets is also impacting potential buyers. “More expensive gas prices are like the straw that broke the camel’s back,” a Columbus, Ohio agent said.
OPEC, the cartel comprised of leading 12 oil-producing countries is scheduled to meet Tuesday. Analysts have projected the group will increase oil production targets, a move that could provide some price easing, which was reflected in early trading of oil futures ahead of the meeting.
