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Spring Home Sales Start Strong

Key Forecast Is Revised Upward, Despite Pockets of Weakness; Rebounds in the O.C. and Boston

April 19, 2005; Page D1

After a multiyear real-estate boom that has raised concerns about a housing bubble in a number of markets, economists and homeowners are closely watching this year's spring selling season for any signs of a slowdown.

So far, there aren't many of them.

Spring tends to be the hottest selling season, with families looking to move well before the start of the next school year. And sales are getting off to a strong start in many parts of the country.

In a revised forecast, the National Association of Realtors now says it expects sales of existing single-family homes to fall 2.4% to 6.62 million for the full year, which still would be the second-highest level on record. That is better than the 5% slide the Realtors group predicted at the start of the year.

One reason: The much-anticipated increase in long-term mortgage rates has yet to materialize. Weak economic news has helped push rates on 30-year fixed-rate mortgages below 6%, from a recent high of 6.17%, according to HSH Associates, providing a nudge to buyers fearful that rates will shoot up again.

The brisk start to the season comes as concerns about the housing market have been escalating. In a speech yesterday, Federal Reserve Governor Susan Bies said, "We are beginning to see signs that housing prices may be reaching a peak in some markets." She cited the growing share of homes purchased by investors, and the large number of borrowers using adjustable-rate, interest-only mortgages in an effort to make high-priced homes more affordable.

Additionally, there is evidence of a weakening in certain corners of the market. In the luxury market, for instance, "what we're finding is that properties that the first quarter of 2005 seem to be on the market longer" in a number of locales, says Stuart Siegel, president of Sotheby's International Realty, a unit of Cendant Corp., blaming the "net impact of sticker shock."

There were signs last fall that the housing market, at long last, was beginning to soften in such places as Orange County, Calif., and Boston. Real-estate brokers say business picked up in many markets after a brief slowdown, helped along by declining mortgage rates. In some local markets, improving economic conditions have played a role. In Atlanta, corporate relocations plus a sense of increased job security have helped boost sales of homes priced at more than $1 million, says Chris Ballard, broker-owner of Century 21 Gold Medal Realty.

In some markets, such as Phoenix and Newport News, Va., real-estate brokers say sales are stronger this year than last. In some cases, homes are flying off the market within days or even hours of being listed. Brokers in some markets say the rise in sales that normally arrives with spring began earlier this year.

The likelihood of yet another frenzied spring comes on top of record sales last year. Fueled by low mortgage rates, sales of existing homes hit 6.78 million, topping a record of 6.18 million in 2003, according to the National Association of Realtors. Home prices climbed more than 20% last year in Miami, Las Vegas, Phoenix, Los Angeles and Washington, D.C., among other markets.

Economists generally agree that price gains will slow to more normal levels, though just when this will happen -- and how deep the slowdown will be -- remains an open question. Home-price research company Fiserv CSW Inc. expects some slowing this year. It forecasts that home prices will rise an average of 7% to 9% this year, following last year's 14.3% rise, in the 90 major metropolitan areas it tracks.

Slowdown In Second Half?

NAR chief economist David Lereah expects a slowdown in the second half. So far this year, he says, the number of homes sold is running about flat compared with last year's strong showing.

The strong housing market "will continue as long as interest rates remain relatively low and credit remains relatively easy," says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley. But, he adds, "the longer the boom goes on, the bigger the correction will be."

In Newport News, Va., "it's even more frenzied than it was last year," says Liz Moore, president of Liz Moore & Associates, where sales rose 43% in the first quarter from the year-earlier period. "If we have a reasonable listing, we have multiple offers in the first couple of days -- five to seven isn't unusual," she says.

The supply of properties for sale is so thin in Manhattan, meanwhile, that more buyers this year are offering $100,000 or more above the listed price.

Arlyne Blitz, a vice president with Corcoran Group, says one of her clients recently made an all-cash offer that was $155,000 over the asking price for a two-bedroom, 1,500 square-foot condo priced at $1.35 million in an arrangement that required would-be buyers to submit one "best and final" offer.

"We were No. 7 of 17," Ms. Blitz says. "The winning bid was for over $1.6 million." Some brokers there are deliberately underpricing property to elicit greater bidding and a higher final selling price, she notes.

Properties also are flying off the market in Phoenix and Tucson, where an influx of refugees from Southern California and Las Vegas -- looking for lower-cost housing or better investment opportunities -- is helping to propel prices skyward. Last year, the average home in the Phoenix area stayed on the market for 50 to 60 days, says Bill Jilbert, president of Coldwell Banker Success Realty. Now, he says, "the pendulum is so far to one side that it's not even fun."

Six Hours, Eight Offers

Broker Tom Weiskopf put his own 3,000-square-foot four-bedroom home in Scottsdale, Ariz., on the market in late February. Within six hours he had eight offers, with most buyers waiving the standard contingencies for financing, appraisal and inspection.

Mr. Weiskopf cut off the bidding at 7 p.m. and accepted an offer for $645,500, $4,500 above the listed price.

The competition among buyers is especially fierce for entry-level homes. In Long Beach, Calif., "anything under $500,000 in a decent neighborhood is going to produce multiple offers," says Richard F. Gaylord, a broker with Re/Max Real Estate Specialists. Mr. Gaylord last month received 29 offers on a 1,084-square-foot, three-bedroom starter home that sold for $510,000, $60,500 more than the asking price.

Russell Garron, a pharmaceuticals salesman, initially offered $455,000 this month for a 1,200-square foot, three-bedroom condo in Irvine, Calif., listed at $449,000.

Mr. Garron upped his offer to $465,000 because there were multiple bids. When his broker, Tamzi Richardson of First Team Real Estate, called at 10:30 p.m. that night with the seller's response, Mr. Garron immediately dashed to Kinko's to fax in his paperwork. While searching for a home, "I slept with my cellphone," says Mr. Garron, who lost out on two other properties.

New Construction

Not every market is as heated. In Kansas City, the average time on the market climbed to 57 days in the first quarter from 49 days during the same period last year.

"We're not seeing the rush of multiple offers...[or] sales coming in well over the list price like we were seeing last year or the year before," says Jerry Reece, president of Reece & Nichols there.

In the bellwether market of San Diego, home prices rose at an annualized rate of 12.5% in March, down from as much as 26.4% in October, according to DataQuick Information Systems, which tracks U.S. real-estate sales.

Houston broker Julius F. Zatopek III, of Re/Max on the Brazos, says sales have softened in that city in recent weeks after spiking during the first quarter as buyers dived into the market, nervous about rising interest rates.

In Miami, where sales remain strong, resale prices of existing condos in the $500,000 to $900,000 price range could fall by as much as $200,000 later this year, predicts broker Mark Zilbert . With so many new units coming onto the market, "the motivation is to be in a hip new property," Mr. Zilbert says. With existing units, "the value isn't there."




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