Slowdown Looms for Home Sales in 2011

HUNTINGTON BEACH, CA-Home sales will slow in the US this year after struggling in the fourth quarter of 2010, according to new data from HouseHunt Inc., a consumer-oriented Internet firm that provides free information and services to homeowners, home buyers and home sellers across the country through its member-agents and through its primary web site, HouseHunt.com. The locally based company says that despite record low interest rates and a temporary slowdown in bank foreclosures, "It appears the housing market struggled in the fourth quarter of 2010 and will continue to struggle in 2011."

Michael Bearden, president and CEO of HouseHunt, commented: “Our research indicates that 2011 will be another tough year. Overall, more foreclosures, declining home prices, and more difficult lending standards are causing home buyers to remain cautious about buying today."

Among the factors working against the market: Banks will accelerate the foreclosure process and interest rates will rise, which will negatively impact prices. "Home buyers continue to struggle to obtain financing because of higher down payment requirements and tougher qualification standards," the company's report says.

HouseHunt cites a strong decline in first-time home buyers during the fourth quarter because of the elimination of the first-time home-buyer tax credit and an increase in repeat buyers of second homes and investment properties. Of the agents polled by the company, 61% reported that there are more sellers than buyers in their respective local markets. "This is the largest percentage reported in over three years and is almost 20% higher than in January of 2010," the report notes. Only 32% of the agents reported a predominantly buyer-heavy market during the fourth quarter of 2010, while 7% reported a good balance between the number of buyers and sellers in their real estate market.

"Another notable trend revealed during the fourth quarter is the amount of time homes are staying on the market," HouseHunt says, explaining that 89% of agents reported that properties are sitting on the market for 60 or more days. More than 20% of agents show homes in their community are staying on the market for over 120 days, which is understandable considering there are fewer buyers bidding and driving up the selling price. "A mere 11% of agents are seeing homes sell within 60 days of being put on the market," it said.

Home prices declined as 2010 came to a close, according to the HouseHunt survey. "With 57% of agents polled reporting a negative appreciation in home prices, it is evident that the real estate market is still suffering," it said. Nonetheless, some cities did report prices rising, among them increases of over 10% in cities such as St. Augustine, FL, Vail, CO, Carmel, IN, Eagle Point, OR, and Saratoga, CA.

One dramatic change from third quarter 2010 is that only 37% of the active buyers on the market now are first-time home buyers, which is the lowest percentage in over three years. This change is largely due to the first-time homebuyer tax credit that ended in the third quarter. Repeat buyers now make up 63% of the active buyers on the market, which includes investors.

Compared to the third quarter results, agents said some buyers are having an easier time getting financing, particularly those with good credit and the ability to make the down payment. Still, the financial aspect for buyers is still the biggest obstacle between them and the purchase of a home.

HouseHunt president Bearden pointed out that, since real estate is a highly localized industry, "There are certain communities throughout the country that are doing well." Low down payment government financing and favorable interest rates are allowing buyers to obtain financing on lower priced properties, which is not available on higher priced homes, he pointed out. "Despite the potential for slightly lower prices in 2011, consumers should really take advantage of the unique conditions with low interest rates, affordable pricing, and the availability of many great homes on the market,” Bearden said.