Cooling Housing Market Means Changes for Buyers and Sellers
STEVE INSKEEP, host:
On Friday's, the business report focuses on your money, and today we'll look at changing strategies for buying or selling your home. Some real estate markets are cooling.
A year ago, sellers had the upper hand in many of the hottest real estate markets around the country, but record high prices, drawing inventories, and rising interest rates are finally turning the advantage from the sellers to the buyers.
We've called Wall Street Journal columnist June Fletcher, who covers the housing market.
June, welcome to the program.
Ms. JUNE FLETCHER (Columnist, Wall Street Journal): Thank you for having me.
INSKEEP: And we should mention that you're at your home in Vienna, Virginia.
Ms. FLETCHER: Yes.
INSKEEP: What are you seeing in your neighborhood?
Ms. FLETCHER: Well, in my neighborhood things are certainly changing. A neighbor last year sold her house in a matter of hours for a hundred thousand dollars more than her asking price, and now houses are lingering on the market.
And people aren't getting any more bidding wars on their houses, and I think this is the sort of situation you see in many markets around the country these days.
INSKEEP: Well now, a year ago a lot of people were just putting what seemed to be outrageous prices on their houses. Now I understand that experts are recommending a somewhat different strategy?
Ms. FLETCHER: Yes, that's true. Many realtors are now suggesting that you may want to price your house 10 to even 25% below the market. What can happen is you can create a bidding war if your house is under-priced. Because buyers really shop, and they're going to recognize if your house is a bargain; and even in a down market, they're going to start to bid it up.
INSKEEP: It sounds like you're saying this is not a time that people who are thinking about selling should panic and sell. It's not the like the bottom is dropping out.
Ms. FLETCHER: No. The analogy I like to use is it's like a whoopee cushion.
INSKEEP: Don't worry about that unpleasant sound, ma'am. That's just the real estate market slowly deflating.
Ms. FLETCHER: That's right. It's never like the stock market drops and the next day everybody panics and there's a Black Friday. And that's because it takes awhile for you to realize that the market is really changed.
And its human nature for people to always expect their house is worth what it was at the top of the market, which most economists would agree was last July.
INSKEEP: Now what about buyers? We assume that it's a better time for buyers, but is it?
Ms. FLETCHER: You know, it is a better time for buyers because there's a lot of more inventory. I would say if I was a buyer right now I would definitely take my time. You don't have to panic now, you can put that home inspection contingency, you can start to ask for concessions; perhaps seller financing. You've got some flexibility on move-in dates.
INSKEEP: If you're a buyer, don't you have to worry about interest rates, though?
Ms. FLETCHER: You do have to worry about interest rates. I would suggest that you start talking to lenders now and try to get an extended lock rate on mortgage interest rates. They are going up.
INSKEEP: An extended lock rate? That means for how long can you get it that you can...?
Ms. FLETCHER: Well that's negotiable. Try to get as long a lock as you can; 30 days, 90 days, whatever you can negotiate. Then go out shopping and make sure that it's really the home that you want.
The other really important thing I think everyone should keep in mind is no longer should you be looking at your house like an ATM machine. It's a house. It's not an investment; its shelter. And if you do that, you'll find a house that really is your dream house, not just what you think somebody else is going to buy later on. And I think everybody will be better off when that happens.
INSKEEP: Well June Fletcher, it's good to lock in on your advice. Thanks very much.
Ms. FLETCHER: Thank you.
INSKEEP: June Fletcher is the author of House Poor: Pumped Up Prices, Rising Rates, and Mortgages on Steroids, How to Survive the Coming Housing Crisis.
June, are you still there?
Ms. FLETCHER: Yes, I'm still here.
INSKEEP: Is there still a housing crisis coming?
Ms. FLETCHER: You know, it could very well be for the markets that have been overvalued, like Los Angeles, Los Vegas, where it's all been pumped up.
You know, typically the higher they've gone, the harder they fall when they do fall.
INSKEEP: Depends on where you are.
Ms. FLETCHER: It really does.
INSKEEP: Well June, thanks again.
Ms. FLETCHER: All right. Nice talking with you.