PHILADELPHIA — On paper, it’s the chance of a lifetime, a golden opportunity not to be missed.
Mortgage interest rates are at their lowest since 1971. Home prices have reached their lowest point since 2002, says IHS Global Insight Inc. economist Patrick Newport, and appear to be stabilizing.
Veteran real estate agents are hard-pressed to remember a time when rock-bottom rates and affordable prices converged this way. So where are all the buyers, now that the tax credit is gone?
Reading headlines about the still-iffy economy and staying put, apparently.
Unemployment and lingering uncertainty about the future rank high on a long list of reasons the housing market is still all bound up. Add folks’ inability to sell the homes they have so they can buy new ones, plus tight credit, low offers, and too many people just out looking.
“Buyers are looking for the perfect wave,” said Art Herling, regional vice president at Long &Foster Real Estate Inc.
Seller Robin Iori wants that perfect wave to break at her spacious townhouse on Philadelphia’s Green Street, listed at $949,000.
The family has occupied this suburbanlike space for just two years. Ron Iori landed a good job in Chicago after more than a year out of work. Robin Iori and children Lou and Francesca, who have “thrived on city life,” are following.
“We did have a private offer at the beginning of the year, and for seven weeks, we thought it was sold,” she said, filling another packing box.
But the buyers’ credit was not good enough for an affordable rate, the deal fell through, and the couple lost two precious months before the house and its roof-deck view went on the market.
“Fifty at the May 2 open house, mostly lookers,” said Robin Iori. Still she said she believed, sincerely, that despite last week’s barrel of bad economic news, the economy was on the mend.
She may be right. On Friday, Herling said there had been an uptick in multiple offers on houses. And he said he thought sales contracts for June looked to be 4 percent to 7 percent above a lackluster May.
The post-tax-credit drop-off in sales concerns Moody’s Economy.com chief economist Mark Zandi.
“The severity of the decline is surprising, particularly given the rock-bottom mortgage rates,” he said. “The stock market correction, weakening confidence, and the still very tough job market may be more of a weight on housing demand than I think.”
But that rate: 4.57 percent!
Gerald Pierri of Exton, Pa., sat down recently with his newly married son, Vincent, crunching numbers to see whether Vincent could afford a house in the Boston area, where he lives.
They were surprised.
Before the tax-credit cutoff April 30, interest rates were about one percentage point higher. Buy today, and the savings on a $250,000, 30-year fixed mortgage would be $54,993 over the life of the loan.
“While most people are likely aware of lower rates, very few do the math to see what the savings represent,” said Pierri, who is selling a house and buying one.
A May Prudential Fox &Roach survey of 690 buyers says people are, indeed, aware. More than 78 percent of those surveyed said low mortgage rates contributed to the uptick in real estate sales before the tax credit expired.
Also a big factor, 68.3 percent said: lower prices.
So why are buyers having second thoughts?
“Uncertainty, of their future, of their job, of their relationships” — that is the reason he hears most often from wary buyers, said Realtor Mark Wade, who focuses on Philadelphia’s Center City neighborhood.
“Many Center City buyers know that a wife or husband, kids and a minivan are in their future, but they are often unsure of when those life-altering events will occur,” said Wade, a Prudential Fox &Roach agent. “Each in and of itself can change one’s need for specific housing.”
Other reasons he hears are fear of change and unfamiliarity with the process.
“I recently had a young surgeon as a buyer who was more afraid of the paperwork than he was of cutting someone open and performing surgery,” Wade said.
Economist Joel L. Naroff points to a shortage of equity for down payments, given a decline in property values.
“A logjam has formed since many people cannot buy a house until they sell their old one, and that cycle has to be broken by confidence in the economy and ability to sell homes,” Naroff said. “Right now, that doesn’t exist.”
Countered Noelle Barbone, manager of Weichert Realtors’ Media, Pa., office, who has been selling houses since 1969: “Sure, you might not sell your house for what you would have gotten a few years ago, but you won’t have to pay as much for a new one.”
“Everyone is afraid of buying a house only to watch its value erode in the first year or two,” said Bankrate.com columnist Holden Lewis. “Even if they plan to live in it for many years, people succumb to fear of short-term price depreciation.”
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