Buyers willing, sellers hesitant
He was worried about overpaying for a house – one that might decline in value to the point where he couldn’t resell it and come out ahead on the deal. My response to him was clear – had he rather wait until prices and interest rates were on the rise or get something when there was downward pressure on prices and rates were low?
He eventually decided to purchase a house and it seems a lot of Americans are seeing current markets as good for them. Sellers, on the other hand, aren’t feeling so great about the market, according to a study released in mid-December by the national Mortgage Brokers Association.
According to that study – entitled The Great Recession and Attitudes Toward Homebuying – 80 percent of American households believe now is a good time to buy a home. Their positive outlook on the market is reflected by falling prices and interest rates that are at historic lows.
A quick look at a couple of Arkansas housing market reports reveal that prospective buyers do have reason to feel optimistic these days. Through November, the average selling price of a home in central Arkansas was $158,308 – down 1.37 percent from $160,505 through the first 11 months of 2010. In northwest Arkansas, the average sales price was $151,149 – down 5.33 percent from $159,966 through the first 11 months of 2010.
Combine those falling prices with an interest rate of 4.08 percent on a 30-year mortgage in mid-December and it is little wonder that there are people out there who believe it’s a good time to buy.
The Mortgage Bankers report also states that about 7 percent of sellers feel optimistic about the national housing market, down substantially from an average range of 40 percent to 60 percent from 1992 through 2005. Looking again at our Arkansas housing market reports, we can see why.
In central Arkansas, buyers listed homes for an average of $165,182 through November but received an average of $158,308 for a sales-to-list ratio of 95.84 percent. In northwest Arkansas, sellers realized an average sales-to-list ratio of 95.55 percent – they asked an average of $158,182 for their homes but received $151,149.
Meanwhile, the average days on market – the length of time homes were on the market before sales were finalized – was 92.22 days in central Arkansas, 156 in northwest Arkansas.
What’s weighing down the housing market? Gary V. Engelhardt, professor at Syracuse University and the man in charge of the survey, said it all comes down to a bad economy and elevated expectations of sellers.
“In economic terms, as market values have fallen, potential sellers have not adjusted their price expectations downward fast enough to bring buyer and seller sentiment in line with one another,” he said. “There are a number of likely reasons for this. First, seller-expected prices may be tied to key past market values, such as the purchase price of the property, or what a comparable property may have sold for in the recent past. Second, underwater homeowners cannot adjust their minimum sales prices much below the outstanding mortgage balance, because they would need to bring cash to the table at sale. And finally, with large declines in market values, sellers now hold a highly leveraged option that pays off with any future increase in prices.”
He went on to say that markets will still be in recovery mode in 2012 as prices stabilize.
What are we to take from the report? Well, it’s still a great time to buy a home and prospective homeowners will likely remain in a good position. Home owners, too, should appreciate the market when they become buyers after they sell their houses. People who already have homes can take some encouragement from Engelhardt’s prediction that values will start gaining again in 2013.
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.