Marketplace Report: Housing Market Cooling Down
NOAH ADAMS, host:
And back now with DAY TO DAY. Here's a term we haven't heard much when it comes to housing for some time: buyer's market. Home sales are down. The supply of housing for sale is up, prices are moderating. MARKETPLACE's Steve Tripoli is here to tell us more. Steve, what's going on in the market?
STEVE TRIPOLI reporting:
Noah, what's going on is that home sales were down for the third straight month in June. The June sales figures were 9 percent below June of last year, and the sales slowdown was sharpest in the northeast and the south.
But sales are down north, south, east, and west. And prices are nearly flat nationwide. Now that's a change from the last few years.
ADAMS: Now can it last, or is it a summertime thing? What do you think?
TRIPOLI: Well, the chief economist for the National Association of Realtors thinks it can last. David Lereah says things will get even better for buyers.
Mr. DAVID LEREAH (Chief Economist, National Association of Realtors): Most definitely. We're going to see further price softening going forward because inventories are rising. And as they rise, sellers will start to bring their prices down, and that will bring buyers back into the market. So the scenario is we'll have more price softening before sales come back.
ADAMS: So he's saying that prices are going to go down even further.
TRIPOLI: That's right. And, you know, it depends - the size of the drops depends on location. You know, location, location, location. If you're in a recently hot market that's risen a lot lately - and that's mostly along the coast but also in the Midwest and some southern markets - in those places, the experts are saying prices can drop from 5 to 15 percent off their highs of last year.
And don't forget some of those areas are not only seeing slackening demand, but this often happens when housing gets really hot - a lot of builders rushed in to take advantage, so now there's an oversupply depressing prices even further. So there are almost four million homes for sale nationwide now, so take your pick. And that's a seven-month supply of homes in the market. Last year at this time, that was less than four-and-a-half-month supply.
ADAMS: Goodness. So kind of a bet here, buyers could wait even a bit longer?
TRIPOLI: Well, that wouldn't be the worst idea. Those rising inventories are going to start forcing sellers to drop their prices, especially in those formerly hot markets. And it's starting to look like some folks who were thinking of buying are already holding back. That's one explanation for why the rental-housing market is very strong right now. Potential buyers seem to be sitting on the sidelines waiting to see what happens next.
ADAMS: We're using the word hot. Does the weather have anything to do with what's going on?
TRIPOLI: It isn't really a weather-driven phenomenon. I mean, usually summer is the buying season. But, you know, you're in a situation now where, you know, you see a buying slowdown, which has already happened. The inventories rise as they already have, and now we're in a stage where psychology kind of takes over.
This is where the sellers can't quite believe they're not going to get the price their neighbors got for their houses last year, so they can't bring themselves to drop their price just yet. But again, in some places where there's a lot of housing on the market, that's already happening, like Washington, D.C. or Boston. Once prices do drop a little more, the demand for housing will start to catch up with supply, and maybe that will bring a more normal housing market next year.
ADAMS: Yes but still, housing - very expensive for people who are just working for a living in many parts of the country.
TRIPOLI: That's true. You know, many people have wondered if prices can hold up in those markets for some time, and somehow they have. There are demographic forces like jobs and immigration and quality of life that just keep drawing people.
By the way, Noah, later today on MARKETPLACE, we'll be looking at how Lebanese refugees in Syria have put a big strain on that country's public services.
ADAMS: Steve Tripoli of Public Radio's daily business show MARKETPLACE, produced by American Public Media. Thank you, Steve.
TRIPOLI: Take care.