Real-estate industry springs into action
In suburban Chicago, it’s paradise to be a homebuyer.
At the Millbrook Pointe development in quaint and pristine Wheeling, a $269,000, brick-and-stone townhouse comes with $25,000 in free upgrades, including wood-burning fireplaces, all-stainless-steel kitchens and marbled bathrooms tricked out with double-bowl vanities and whirlpool soaker tubs.
Down the highway at the Patriot Place golf course villas in Bolingbrook, buyers are lavished with lawns sodded to perfection, absurdly low seller financing and a year of free insurance that will pay the mortgage if you lose your job.
At the Sunset Ridge estates, the amenity bonanza gets even more surreal: Buy a customizable colonial for as little as $170,000 and get a brand new, $17,000 Chevy Cruze. The 2011 model. For free.
Spring for home-sellers is like Christmas for retailers — peak season. Normally, that might mean a few giveaways. A better brand of siding here. An expanded choice of tile color there. But a new car? “Obviously, business has been soft,” said Kim Meier, president of KLM Homebuilders, the company offering the promotion.
The festival of upgrades on new homes — especially in the housing markets that were savaged by the subprime meltdown — is queasy confirmation of just how much the housing market remains the sickest part of the U.S. economy.
Existing home sales plunged nearly 10 percent in February to their lowest level in nine years. It was the largest drop since July. Forty percent of those sales were on distressed properties. And new-home sales are on track to come in at just 250,000 this year, the fewest since the Kennedy administration, when there were 120 million fewer people in the United States.
“What is discouraging in many markets is that it appears as if some of the local builders are creating the volume,” said Wayne Yamano, vice president with John Burns Real Estate Consulting.
Across the country, real-estate agents are reporting a rise in traffic at open houses. But they say buyers are reluctant because of the shell shock they suffered after the free-money machine blew up in everyone’s face. The foreclosure epidemic. The plague of employment insecurity. The fear that the U.S. is on a downward slide. They’re all playing into buyer commitment phobia, brokers say.
There’s also confusion over the conflicting signals. Prices are low, but unemployment is high. Mortgage rates are attractive, but lending standards are strict. Renting is newly chic. “Everybody is now self-loathing about how we’re greedy Americans and we shouldn’t want to own homes,” said Jonathan Miller, CEO of real estate consulting firm Miller Samuel.
The U.S. certainly will have a spring home-buying season this year. But even if sales rise as usual, they won’t pull the zombie housing market out of its stupor. Nationwide, forecasters expect house prices to drop at least 5 percent more this year. And no one in housing land is murmuring about anything like price stabilization until 2012.