Oct 17, 2008 5:00 pm US/Pacific
Home Buyers Backing Out Of Deals In Poor Economy
Stock Market Losses and Fear Push Buyers to the Sidelines
SAN FRANCISCO (CBS 5) ―
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"For Sale" sign in front of home, San Francisco.
AP
When the stock market dropped, so did the hopes of many home buyers. Three out of six of his prospective buyers either lost their down-payments in the stock market or lost their nerve.
"With the crash, these people lost over a quarter of their savings in the stock market and so they've backed off," said home buyer's agent Bob Rose.
Three out of six of his prospective buyers either lost their down-payments in the stock market or lost their nerve. The National Association of Home Builders reports a third of deals-in-the-making or contracts are being canceled compared to one in twenty during the housing boom days.
Another reason for buyers backing out is rates on 30-year mortgages are rising to the highest level in 2 months. Last week they averaged 5.94%. This week it's 6.46%. For a Bay Area home at the median price of $520,000, with 20% down, your monthly mortgage would have been about $2,677. With the increase in the 30yr loan it's $2,819 or about $142 more per month. So that's why realtors nationwide said one in four of their clients is sitting on the fence or waiting for sellers to sweeten their deals.
Rose said buyers are in a position to negotiate. "I think that we're going to be able to talk to the seller and tell the seller that hey, the market has really taken a big downfall so your price is no longer what you think it is and this is the offer. I think it's a good offer and you negotiate."
Even Bob believes we haven't hit bottom home values could drop another 5 percent. But he doesn't recommend waiting if you find the right house.
That's the case for Hayward school teacher Laura Pesavento.
She realizes prices may drop further, but has a bid on a home in foreclosure that she hopes to get.
"It's a little scary and the news is saying prices will go down on houses. But it's a long term investment and I'm not trying to flip a house," said Pesavento. "I know the market will go back up and now's the time I can get a loan. So I'm going for it."
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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