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Margot Ray, a radio-ad saleswoman in Stockton, Calif., put her five-bedroom, three-bath house on the market in February for $480,000. There it sat, along with about 3,000 other homes for sale. She dropped the price to $465,000 in April. Nada. "We'd have an open house and maybe one or two people would come by. I had an open house where nobody came," Ray says.
In July, she had a brainstorm: Why not advertise on the radio? The ad put the house on the map. Now agents remember the address. The price is down to $427,000 and, at a recent open house where Ray raffled football tickets and a spa day, 15 groups of potential buyers showed up on a 107-degree day.
But it still hasn't sold.
Ray has two kids in college and a new house with its own mortgage. "Am I to the point of desperation? Not yet," she says, "but I want this house sold."
Was it only last summer that houses sold in a day, buyers were bidding up prices and sellers in some markets haggled down real-estate agents' commissions? Nationally, 39% more "existing" homes -- not new ones -- are on the market than last year this time. Real-estate agents are giving stunned sellers crash courses in marketing. Agents now command the full traditional 6% commissions -- sometimes more -- if only to use most of it as bait so they can offer up to 4% or 5% to a buyer's agent for a successful sale.
What a difference a year makesIn the toughest markets -- including the Florida cities, Detroit, Stockton, Sacramento and San Diego -- incentive is the name of the game. One Florida agent offered a Mercedes-Benz with a house sale. Others dangle vacations or gift cards with thousands of dollars in gasoline.
In its report released Aug. 15, the National Association of Realtors reported that 26 of 151 metro areas experienced outright price declines in the March-June quarter. The biggest price drops in percentage terms were in Danville, Ill., where home prices fell by 11.2% in the spring compared with the spring of 2005, and the Detroit area, where home prices were down 8%. For condominiums, 1 in 4 metro areas reported a decline in prices.
June** 2006 vs. May 2006
June** 2006 vs. June 2005
Note: *Does not include new homes. **Seasonally adjusted. Source: National Association of Realtors.
"We have sellers not only competing with an onslaught of resale houses on the market, but we also have home sellers competing with new developments, where they are offering tens of thousands of dollars in incentives, or even making mortgage payments, buying down loans, putting in swimming pools or paying points," says Raylene Miller, Margo Ray's agent.
New home sales -- about 15% of the market -- have declined 12% this year. Pessimism among builders is growing, says Paul Lopez, National Association of Home Builders spokesman. In July, the National Association of Home Builders' monthly survey of builders got 369 responses: 75% said they're offering upgrades like hardwood floors, granite countertops, high-end appliances, pools, garages or other freebies to new-home buyers. That's 25% more than last year. In January, the NAHB survey revealed that 31% of builders were paying buyers' closing fees; 15% were somehow helping with financing.