Homebuyers' Dilemma: Has Market Bottomed?
Bob Lynn stands in front of a house he remodeled in Denver. It took nine months to sell it for $295,000 -- $30,000 less than what he was hoping for. Jeff Brady/NPR hide caption
Bob Lynn stands in front of a house he remodeled in Denver. It took nine months to sell it for $295,000 -- $30,000 less than what he was hoping for.
Jeff Brady/NPRThe National Association of Realtors on Tuesday reported a 27 percent drop in existing home sales in July -- to the lowest level in 15 years. Sales had already taken a sharp dive at the end of April, after a federal tax credit for first-time home buyers expired. Economists now say any significant recovery is unlikely until the job market improves.
Even markets that were not hit as hard as Las Vegas, Miami and Phoenix are experiencing some pain. Denver didn't have the run-up in prices over the past decade those other cities did, but it's still taking much longer to sell homes.
Bob Lynn, co-owner of Peak Property Development Co., knows that.
"We're a fix-and-flip company," Lynn says. "We buy houses, fix them up and sell them."
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Inside a three-bedroom house east of downtown, Lynn points out all the changes he made so the house would be more appealing to buyers. He raised the ceiling, put new granite counters in the kitchen and installed wood floors. The sales price is close to the median for this neighborhood at $295,000.
"I expected $325,000," says Lynn, and it took nine months to sell.
He's accustomed to his projects selling before he's even done, but he says lenders are extra picky on loan applications these days. And even with interest rates well under 5 percent, Lynn says, buyers are still hesitant -- unsure if the bottom of the market has arrived.
There are some people benefiting from the current market, and Lynn doesn't have to look far to find them. His business partner, Fred Schneider, bought his condo just six months ago.
"It's got a fireplace, washer and dryer, it's about 1,050 square feet, which is pretty good size," says Schneider, who took advantage of the federal tax credit for first-time home buyers.
Schneider says the place was a steal, too. In 2003, it sold for about $96,000. Schneider picked it up for $44,000.
This is the house Bob Lynn, owner of Peak Property Development Co., remodeled in Denver. hide caption
This is the house Bob Lynn, owner of Peak Property Development Co., remodeled in Denver.
Predicting when the housing market is going to turn around is occupying many smart minds these days. Just before the tax credit expired, existing home sales went up, but then after the credit expired they went down again.
"It's kind of in limbo," says William Wheaton, professor of economics at the Massachusetts Institute of Technology.
"I think when the economy recovers -- or starts to recover -- we'll see a pickup in sales," Wheaton says. "As long as the level of building activity stays low, the inventory should continue to decline, and that will set the stage for a recovery in prices."
Meanwhile, investors will watch the numbers for signs. On Wednesday, the Commerce Department releases statistics on new home sales for July.