Spring typically is the year's busiest season for residential real estate, but this year some normally upbeat sales agents are showing signs of nervousness as they confront sluggish growth and tough lending standards.
“It’s so hard to tell what will happen," says Sabrina Jones-Schroeder, a managing broker and owner of Exit Real Estate Professionals in Spokane, Wash. She says her biggest concern is that "the lending industry remains so conservative,” making it hard for buyers to get loans.
Jones-Schroeder is not alone in her sentiments. The National Association of Realtors cites lenders’ conservatism and appraisal complications as among the top two impediments to a real estate recovery, according to spokesman Walt Molony. The trade group argues that home sales volumes would rise 15 percent if lending standards simply returned to pre-bubble norms.
Sales of existing homes fell sharply in February, but the Realtors project volume will rise 7.4 percent this year. Still even the Realtors expect prices to continue declining, falling by about 1 percent this year before rising modestly next year. In other words, things aren’t getting worse, really, but they’re not improving dramatically either.
Molony noted that transactions this year are being done without a federal tax credit that helped boost activity last year.
Real estate activity often picks up in the spring as sellers strive to get top dollar catering to buyers who want to move in the summer.
But this year prospects are highly uncertain as economic growth remains relatively sluggish and the post-bust market is still glutted with inventory generated by millions of foreclosures.
Taylor Connolly, a Redfin agent in the Washington, D.C., metro area, is optimistic — but his enthusiasm varies by geographic location within his large swath of turf.
Buyers and sellers in or near downtown cores are gaining confidence after six months of stabilized or even rising prices in their neighborhoods, while those shopping or selling in further-out suburban locations are not seeing the same market improvements.
That said, Connolly has some longer-term concerns about the volume of homeowners who are “underwater” on their mortgages, owing more than their mortgage balance. This could suppress some potentially nice listings, he says.
“Sellers may run the numbers and see them simply not add up,” Connolly says. “There are still quite a lot of people underwater around here.”
Carl Tate, an agent in Southern California, said by e-mail that he was nervous about the upcoming spring and summer selling season because markets in his area have not hit bottom yet, buyers are having trouble qualifying for loans and banks are forcing some short sellers into foreclosure, complicating the market’s inventory and values.
Maybe next year?
Jennifer de Vivo, an agent with the De Vivo Team in Orlando, Fla., is more upbeat. She said she is seeing more interest from buyers, and expects sales levels to clock in at volumes reminiscent of the pre-bubble days.
She said she is seeing an increase in "traditional" listings, meaning the properties are not underwater or in foreclosure. But she is concerned about the cost of mortgage and homeowners’ insurance, appraisal disparities and the possible unleashing of “shadow inventory” — homes rented or sitting empty until an owner decides to list — which could water down the market.
PR campaign for ownership
Add to the picture some new wrinkles, including reports that existing-home sales figures might be inflated due to changes in data collection methodology. In addition, Congress is considering the fate of giant mortgage agencies Fannie Mae and Freddie Mac, and loan standards are likely to remain tight as part of broader banking reforms included in last year's Dodd-Frank Act.
Against this backdrop, The National Association of Realtors recently completed a multicity tour of a bus festooned with a banner reading "Home Ownership Matters.” The tour advocated for preserving key benefits of home ownership after years that have seen skeptics take a hard look at the industry.
Still, if 2011 is a stormy time for real estate, some say it’s the beginning of a new and better era, in which buyers are better-qualified under their newer, more conservative financing, and good deals are available.
Eddie Nguyen, an agent who works mainly with buyers in San Diego, said the hard-hit market is emerging from the bust.
Nguyen expects to close 75 deals this year — double his volume in 2010. While he worries about the potential “unleashing” of foreclosures by lenders with large stocks of repossessed homes on their books, he also thinks demand exceeds supply in his market. Most of his buyers are under 30, and many are using FHA and VA low-down financing, he says.
If he’s nervous, it’s about keeping up with demand. "This is probably the best market I’ve seen in about five years,” he says.