Soft Housing Market Catches Some Between Homes
DON GONYEA, host:
On Fridays we focus on your money, and today, the most expensive thing most people will ever buy is their home. And the housing market is slowing down.
Numbers out this week show that both new and existing home sales are down about ten percent since last year, while the number of properties on the market is up sharply. That makes it a lot tougher to sell a house or a condo, and for people who've bought a new home and can't sell their old one, that's a very expensive problem.
NPR's Chris Arnold reports from Boston.
CHRIS ARNOLD reporting:
In neighborhoods around Boston in the past two years, the number of condos up for sale has doubled, or in some places, more than tripled. That's glutting the market and leaving many properties sitting unsold for months.
Ms. KATHLEEN POTTER(ph) (Condo Owner, Watertown): I do have two bedrooms here, and everything is updated. You know, tiled bath, granite countertops in the kitchen.
ARNOLD: Kathleen Potter is walking through her two-bedroom Condo in Watertown, near Cambridge. It's on the banks of the Charles River, which she can see most of the year when the leaves aren't so thick on the trees outside her windows.
Ms. POTTER: I can see the river. I can see the harbor crews, all the different crews, MIT, Northeastern, go right by my balcony.
ARNOLD: Potter is a mental health case manager. She's getting ready to retire, and she found a different condo that she thought would be better as she gets older: fewer stairs, a short walk to the market. And she's already put in an offer and a down payment. She'd been trying to sell this condo for $395,000, but its been on the market for four months now, and she's dropped the price to $335,000.
Potter's realtor, Anita Shishmanian, says her office has been tracking selling prices around the area.
Ms. ANITA SHISHMANIAN (Realtor): The drop has been fairly significant. Between last June and this June we're seeing about a 15 percent drop in prices.
ARNOLD: Meanwhile, Potter's unit still isn't selling, and she's worried she might have to pull out of her agreement to buy the other condo. That could mean losing her down payment - not a small amount of money.
Ms. POTTER: About $20,000. And that's really kind of heartbreaking to me because it was the last bit of money I got from my father, his will.
ARNOLD: Last year, many other people saw homes around theirs selling quickly for high prices, and they've gone ahead this year and bought another home without selling theirs first. But these days, that can get you into trouble.
Chip Case is a housing economist at Wellesley College.
Mr. CHIP CASE (Housing Economist, Wellesley College): That's the big danger, double payments and bridge loans and things like that. And those people get burned. So its nail biting time for people who really need to sell, and, you know, in this environment, the only real way to sell is to have a terrific house or lower the price.
ARNOLD: But even lowering the price quite a bit isn't working for some people.
Mr. MATT SUMMER(ph) (Sales): Every day it's a stress. You wake up and you think, okay, how much money is in my savings account?
ARNOLD: Matt Summer does sales for an educational publishing and marketing company. He recently bought a house in the suburbs outside Boston but can't sell his three-bedroom condo in the city's Dorchester neighborhood, even though he's dropped the price from $339,000 to $280,000. He's been paying two mortgages now for going on four months.
Mr. SUMMER: It's always funny when I get home from work, my partner always says, oh I can tell you wrote the mortgage checks today. Because I'm allowed one day a month where I'm just in a horrible, horrible mood.
ARNOLD: As if paying two mortgages wasn't bad enough, Summer's partner lost his job right after they bought the new house.
Mr. SUMMER: Every discussion goes around it. Well, we just had a problem with the car - but it's one of those things where, well, let's not do it. Let's wait until the condo sells and then we can have the car fixed. You know, I think about my IRAs or my 401Ks and do I have to break into those.
ARNOLD: Many economists right now don't predict a serious housing crash. Rather, they say the overheated market just had to cool. But...
Professor WILLIAM WHEATON (Economics, MIT): There are two wild cards this time around.
ARNOLD: William Wheaton is an economics professor at MIT. First, he's concerned that interest rates will keep going up and all the people on adjustable rate loans will be forced to sell as their payments go up. He's also worried that a lot of people who bought investment or second homes recently could get spooked and sell them.
Prof. WHEATON: They could flood the market with a large number of sales, and that would cause a much more serious correction.
ARNOLD: Wheaton advises people considering buying or selling to wait and see what happens. But if you are looking to buy a home, with prices unlikely to go anywhere but down for the next year or so, economists say you should take the time to find something you really like and want to stay in for awhile.
Chris Arnold, NPR News, Boston.