Los Gatos Weekly-Times

Homes

Does housing market favor buyers or sellers?

It's just normal, 'more realistic,' says Byron

By Rose Meily

Sales of existing homes experienced a minor decline nationwide in May, even as home prices continued rising, according to the National Association of Realtors. Regionally, the Northeast experienced the largest drop in demand, while existing home sales in the West saw slight gains. Despite the slowdown in home sales, real estate experts agree these are signs of a more balanced market, and not symptoms of a crash.

Nationwide, total sales of previously owned homes--including single-family, townhouses, condominiums and co-ops--dropped 1.2 percent to a seasonally adjusted annual rate of 6.67 million units in May from April's figures, and were 6.6 percent below the 7.14 million-unit level in May 2005.

The national median price of homes sold in May increased to $230,000, up 6 percent from the year before, when the median was $217,000.

"There's now a clear pattern of slower home-sales activity in many higher-cost markets, which are more sensitive to rises in interest rates, and higher home sales in moderately priced areas which have experienced job growth," said David Lereah, the association's chief economist.

Lereah said conditions are mixed.

"Although mortgage interest rates remain historically low, the uptrend in interest rates this year is affecting those buyers who are at the margins of affordability," Lereah said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.6 percent in May, up from 6.51 percent in April; the rate was 5.72 percent in May 2005.

During the last five years, home sales surged to record levels as buyers took advantage of the lowest mortgage rates in 40 years. Now, as mortgage rates continue to steadily increase, real estate experts see housing returning to a more normal pattern this year, but they don't believe the housing market will crash.

Thomas M. Stevens, National Association of Realtors president, said it's important to keep the current market in perspective. "Housing is continuing to support the overall economy by providing a sound foundation for other sectors to grow; the normalization that is taking place in the housing market is good for the long-term health of the industry," Stevens explained.

Realtor Dennis Byron of Byron and Associates in Los Gatos agrees with Stevens. "What I'm seeing is conditions have gotten back to a more normal market, from what to me seemed like 10 years of insanity. We're now getting back to the point where we have a more realistic market," said Byron. "At this point, I wouldn't describe it as a buyer's or seller's market. The market is slightly on the seller's advantage, but it will probably change."

Adam Atito, a Realtor with Keller Williams in Palo Alto and chairman of the Silicon Valley Association of Realtors Palo Alto District, also described current market conditions as "more balanced."

Both Byron and Atito said the market is actually "fairly active" and "certainly not slowing down," particularly in the Bay Area.

Byron, who lives in Los Gatos, noted, "Just about a month ago, the house across the street from where I live received six offers. There are a number of homes in the area that are receiving multiple offers. Homes just need to be priced right."

Under present market conditions, Byron and Atito advise sellers to take care in setting a price for their homes. "Sellers need to be more realistic about the value of their home," said Atito. "They need to listen to their Realtor when coming up with the price of their property."

Byron added, "Also, I would recommend sellers to possibly look at staging their home and to accentuate all the advantages your house has over others in the neighborhood."

The Realtors said buyers have more inventory from which to choose, but they also indicated it is still a very good time to buy a home.

"Houses are still appreciating. Buy when you can, because if mortgage interest rates continue to go up, even if prices stay the same, the costs to you will increase," said Atito.

Byron said, "Although buyers have a little more to choose from, I'd tell them not to get too greedy because sellers are not ready to bring prices crashing down. If you look at all aspects, now is still a good time to think about purchasing a home."