2006 is already fulfilling predictions of a weaker market. Sales of existing homes fell in January for the fifth month in a row, the National Association of Realtors (NAR) said Tuesday. The same month, new-home sales slid 5%, the government said Monday. Builders are seeing more orders canceled. Meanwhile, the number of homeowners who are late paying their mortgages has been creeping up. (Related: Home loan applications fall again)

Even so, prices are expected to rise about 5% this year despite the cooler market.

"January's weak existing- and new-home sales numbers are the strongest evidence yet that after five remarkable, record-setting years, the housing market is in decline," says Patrick Newport, the U.S. economist for Global Insight.

The drop in home sales defied unseasonably warm weather and cash and give-away incentives from builders that had raised hopes for a brighter showing.

"Imagine if the weather had been terrible," said Phillip Neuhart, economic analyst for Wachovia.

No one needs to tell that to Fran Floyd. She took her Houston townhome off the market Saturday after nearly six months — even though she was willing to sell it for $3,400 less than she paid in 2002.

"It's just sad," said Floyd, 81. "I've got to sell. I don't know what I'm going to do. What I'm thinking about and praying about is renting it for a year, hoping the real estate market gets better."

Unfortunately for her, the NAR projects a 5% decline in existing-home sales this year, to what would still be historically high levels.

In January, existing-home sales dipped 2.8%, to a seasonally adjusted pace of 6.56 million, down 5.2% from January last year. At the same time, the number of single-family homes for sale rose to the highest since 1986 — and 34% higher than a year ago, according to Insight Economics. That's a sign would-be buyers aren't so quick now to take the plunge.

"We've just got tons of inventory," and prices are coming down in Grand Rapids, Mich., said Pat Vredevoogd of AJS Realty.

One in five builders said they are seeing more cancellations of new-home orders than they did six months ago, according to the National Association of Home Builders, with 4% saying the problem is significant. To entice home shoppers, many builders are offering free TVs, swimming pools, landscaping and other incentives.

That's good news for buyers. But it's bad news for sellers such as Kent Anderson. Kimball Hill, the developer of his Las Vegas community, is now offering home buyers so many incentives — including free granite countertops and stainless steel kitchen appliances — that Anderson had to cut his asking price on the home he bought from Kimball Hill less than a year ago.

"As builders close out a community, those last homes are pure profit" for them, says Bruce Hiatt, Anderson's Realtor. "It really changes the comparable sales in the area."

Regionally, the only bright spot in January was in the South. Sales there rose 2.6% from December's pace. Home sales suffered most in the Northeast, falling 10%. That was followed by a 7.7% drop in the Midwest and a 3.5% dip in the West. January's declines are even sharper when compared with January of last year.

One key reason fewer people are buying: They can't afford to. The median price — half cost more, half less — was unchanged from December at $211,000 but was 11.6% higher than in January 2005.

It's clear that some homeowners are having trouble paying their mortgages. The number of homeowners who are 90 days or more behind on their primary mortgages rose to 3.6% in December, up from 3% last March, according to Loan Performance.

For subprime borrowers — those with impaired credit who carry higher-interest loans — the number of delinquent loans has jumped to nearly 10%.

http://www.usatoday.com/money/economy/housing/2006-02-28-real-estate-usat_x.htm

Brother Pan I am glad you posted this article. This decline in real estate is why I think it is a great time for people who are living transtionally to buy a home. Sellers will reduce the prices of homes and will be willing to pay closing costs (My Seller reduced the price by 4ooo and paid about 4000 in closing costs when I purchased my home from the shelter).

I really think it is a good time for the poor to get an asset.

Brother Pan I am glad you posted this article. This decline in real estate is why I think it is a great time for people who are living transtionally to buy a home. Sellers will reduce the prices of homes and will be willing to pay closing costs (My Seller reduced the price by 4ooo and paid about 4000 in closing costs when I purchased my home from the shelter).

I really think it is a good time for the poor to get an asset.

That's absolutely correct, this is a good time to look into buying property!

Pan and Maniasc, don't you think that one reason why foreclosures are rising is because some people purchase the "maximum" amount of house they are told they can afford which they often don't realize is only the price of the mortgage loan? Then when they get into the house they go, "Ut oh, now how are we going to pay the taxes and insurance and monthly living expenses?"

Regardless of what a real estate agent or banker tells you what you can afford, you don't have to purchase a house at that amount. Consider looking for a bargain at a lower price and just as much house as a more expensive one. They are out there. Leave some breathing room in your budget so that you can buy a house and still be able to eat, have heat and be prepared for emergencies without pulling out a credit card.

Develop a "spending plan" BEFORE you start looking to buy a house.

MHO,
Queenie :heart:

Pan and Maniasc, don't you think that one reason why foreclosures are rising is because some people purchase the "maximum" amount of house they are told they can afford which they often don't realize is only the price of the mortgage loan? Then when they get into the house they go, "Ut oh, now how are we going to pay the taxes and insurance and monthly living expenses?"

Regardless of what a real estate agent or banker tells you what you can afford, you don't have to purchase a house at that amount. Consider looking for a bargain at a lower price and just as much house as a more expensive one. They are out there. Leave some breathing room in your budget so that you can buy a house and still be able to eat, have heat and be prepared for emergencies without pulling out a credit card.

Develop a "spending plan" BEFORE you start looking to buy a house.

MHO,
Queenie :heart:


NNQueen, you are so correct. I am a Licensed Mortgage Broker/and Real Estate Paralegal/and invest property owner/Landlord.

I talk to people every day and counsel them on how much of a house they can afford depending on several factors to include income. There are a lot of people out there that get themselves into situations they have no idea how problematic it will be in the long run.

People need to read and ask questions, and understand that purchasing a home is a great undertaking and should not be taken lightly. I have had to tell hundreds of people that the house they want do not support there income, debts, liabilities and have them cry and tell me how they can do it anyway. I have begged and pleaded and refused to do the deal in almost all cases. I couldn't sleep with myself knowing that I put someone in a situation where I know they will fail.

NNQueen, you are so correct. I am a Licensed Mortgage Broker/and Real Estate Paralegal/and invest property owner/Landlord.

I talk to people every day and counsel them on how much of a house they can afford depending on several factors to include income. There are a lot of people out there that get themselves into situations they have no idea how problematic it will be in the long run.

People need to read and ask questions, and understand that purchasing a home is a great undertaking and should not be taken lightly. I have had to tell hundreds of people that the house they want do not support there income, debts, liabilities and have them cry and tell me how they can do it anyway. I have begged and pleaded and refused to do the deal in almost all cases. I couldn't sleep with myself knowing that I put someone in a situation where I know they will fail.

Sister you are to be commended for your compassion and integrity!! :bowdown:

In my area properties have risen 22.9 percent in the last 6 months.

California is terriable they want $400,000 for crack houses

That's absolutely correct, this is a good time to look into buying property!

It's only a good time if you can qualify for a decent, fixed loan program. Otherwise, the long term finace costs of many adjustable rate programs are not worth it. Why?

Because new housing starts are slowing which means that many markets are witnessing depreciating market values in their local markets which mens that lenders are raisng mortgage rates and home appreciation values result in consumers paying higher interest while their HOME EQUITY is either declining or increasing at slower rates.

I find this article interesting and thank you for posting. I have had a lot of folks criticize my moving rom los angeles for a number of reasons but the move is paying off because I timed the market, was able to pick up a piece of property which has increased in value by 1/3 in the first 6 months, while unloading a ridiculously over-valued condowhile keeping my costs down to the point of paying paying capital gaints tax less than 3k, and getting creditfor the mortgage deduction on two homes +point+property tax..

Key to this is buying out of a declining market and into a market that is appreciating.

So the point is, buying at this point is only beneficial if it leads to BUILDING EQUITY, otherwise home buying and ownership can become more of a liability than an asset...with rising home energy, homeowner's insurage, title fees and property tax increases, one man's asset is another man's liability.

Pan and Maniasc, don't you think that one reason why foreclosures are rising is because some people purchase the "maximum" amount of house they are told they can afford which they often don't realize is only the price of the mortgage loan? Then when they get into the house they go, "Ut oh, now how are we going to pay the taxes and insurance and monthly living expenses?"

Regardless of what a real estate agent or banker tells you what you can afford, you don't have to purchase a house at that amount. Consider looking for a bargain at a lower price and just as much house as a more expensive one. They are out there. Leave some breathing room in your budget so that you can buy a house and still be able to eat, have heat and be prepared for emergencies without pulling out a credit card.

Develop a "spending plan" BEFORE you start looking to buy a house.

MHO,
Queenie :heart:

A principal reason for the rise in foreclosure rates has to do with overall market decline in the housing and construction industries, rising adjustable mortgage rates, and people often overprice themselves and their home equity values are not appreciating at a pace higher than increased costs. A lot dont pay their taxes and insurance along with their mortgage (via escrow) then are unable to pay when thos bills become due. Failure to pay property tax results in tax lein, and the costs involve oftentimes leads to forclosure and state lein or tax sale, while the consumer is now out home with their credit ruined.

its a vicious cycle.

Key to this is buying out of a declining market and into a market that is appreciating.I'm glad you made this point. There is no use in buying a property that will depreciate. It's not worth it unless you plan to stay there forever.

I live on the east coast and I think EVERYTHING is overpriced here. In my neighborhood they're building townhouses for $800K!!

I'm glad you made this point. There is no use in buying a property that will depreciate. It's not worth it unless you plan to stay there forever.

I live on the east coast and I think EVERYTHING is overpriced here. In my neighborhood they're building townhouses for $800K!!

This is the danger. What happens is a lot of people overextend themselves on other revolving credit, hoem equity loans and second mortgages for a "paper tiger". Oftentimes when they sell the home may sit while costs are rising and a lot of folks end up "unloading" below the overvalued market price.

In regards to a cooling Market:

One of the reasons why I think this market is good for people in transition and low income peoples, is because of the length of time properties are on the market, the first time homebuyer programs that are solidifying rates that are lower than prime (6.07 today for a 30 yr fixed), for people with no credit history or bad credit history is amazing.

I purchased my home from a homeless shelter it was originally on the market for 180K and sat for a year (which was about a year later, the home was on the market for 135,000), when I made my offer, it was made at 130K. The seller had to go down at least 50K because of market cool down, she also paid closing costs and assessments at my town home association (21K total – 4K closing 17K assessments). My house is about 2500sq ft (2car garage, and 4 seasons back porch) so I paid about $52 bucks per sq foot; moreover, the property is located 5 minutes from downtown Minneapolis, to add even more of a blessing my house came with 30K of equity because it appraised at 160K, couple that with new construction right next door that sold for 200K (so my equity just went up) and I came out alright. I also closed my home in 10 days.

I was pre-approved for 180K, while only 3 months at my job, I decided to go with a stated loan arm option, a 3/1 with 7.6 fixed for the first 3, with no pre-payment penalty on the first and second mortgage. I am currently in the process of refinancing the mortgage so that I can pull the current equity I have to par-take in a real estate development endeavor.

The reason why I say this is because none of this would have happened if the market was HOT! If the market was hot this home would have still been at 180K. I believe a hot market is only good for those who have the capital to cover mortgage payments in the event of a decline in sales, or loss in value. A cooling market in my opinion, is more beneficial to middle class and lower income peoples, because it’s gives them the power to negotiate as I had did, and it also gives them a chance to find a seller that will pay closing, and or make improvements to the home before selling the house, in a hot market in my opinion, most purchases are as is, because of high appreciation and surging market value.

It is a really great time to buy right now, and I want to encourage my brothers and sisters to do it in their means, please purchase a home according to your debit to income ratio, not your gross or net pay. I would advise every brother and sister at destee to repair their credit before financing, if I would have better credit I would have gotten a better loan amount. I would encourage my people to have at least a 620 beacon score before applying for a loan, that way you can get rate offers closer to prime rates (prime rates are the lowest rates offered to consumers with good credit history). Please do not get discouraged by increasing home rates either, they are going up, but only in small margins, get the rates while they are still low.