AP -- Real Estate Expected to Flounder in 2007
Monday December 11, 4:04 pm ET
By Rachel Konrad, AP Business Writer
After Disappointing 2006, U.S. Real Estate Market Expected to Stagnate in 2007
ANTIOCH, Calif. (AP) -- Donald Anthony has slashed the price on his four-bedroom, two-bathroom house by almost $80,000 -- and added $40,000 worth of improvements, including a new kitchen and landscaping in the leafy yard.
He's used three different agents. He's listed the 1,800-square-foot home -- an immaculate ranch on a quiet cul-de-sac -- on for-sale-by-owner sites, in newspapers, on cable television and community site Craigslist. He or his agents have spent at least 50 idle afternoons hosting open-house events.
But the 74-year-old retired physicist cannot unload the house, now listed at $489,950 -- well below the price of comparable homes in the fast-growing region between San Francisco and Sacramento.
"The buyers have vanished," Anthony shrugged in front of new Shaker maple cabinets and never-used appliances. "If this doesn't sell post haste, I'm going to bite the bullet and pull it off the market."
If Anthony can't wait another year or more, he might as well rip out the for-sale sign now.
Although few experts predict that home values will fall dramatically in 2007, many economists say that prices won't improve for 12 to 18 months. And without the cushion of rising home equity -- which softened the blow of high oil prices last year and kept consumers buying big-ticket items at a rapid clip -- Americans may lose confidence in their finances, and the broader economy is likely to suffer.
Ambitious building booms in many markets in the past half-decade, combined with mortgage interest rates that have increased about 1 percent in the past year, have resulted in residential real estate stagnation. The gridlock defies conventional wisdom, stubbornly remaining neither a buyer's nor a seller's market.
"We are currently experiencing the worst of the market freeze, which is being exacerbated by the gap between the buyer's desire for bargains and the seller's fantasy of what they once thought their homes would be worth," said Diane Swonk, chief economist for Chicago-based Mesirow Financial, who forecasts a rebound in early 2008. "The good news is that there are some signs of stabilization. The bad news is that a substantial backlog of unsold homes still exists."
Global forces and U.S. monetary policies play important roles in the housing slowdown, which already appears to be depressing the national economy.
The newest forecast by Moody's Economy.com, a private research firm, projected that the median sales price for an existing home will decline in 2007 by 3.6 percent -- the first decline for an entire year in U.S. home prices since the Great Depression of the 1930s.
The Commerce Department reported Nov. 29 that gross domestic product grew at a 2.2 percent annual rate in the third quarter, down from 2.6 percent in the second quarter. The residential construction falloff subtracted 1.2 percent from growth, the department stated
