Oct 6, 2008 9:55 pm US/Central
Credit Crunch Has Domino Effect On Housing Market
CHICAGO (CBS) ―
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Homes under construction in Bolingbrook, Ill. on June 1, 2006.
AP
We are used to seeing ads for auto dealerships offering limited time discounts, but CBS 2's Vince Gerasole reports a national real estate firm is also slashing prices for a short time only.
It may sound like a gimmick at first, but the discounts offered by Coldwell Banker coast to coast, in test markets, have helped bump up sales in a tough economic climate. The average time for a home to be on the market used to be 67 days; now it is up to 90 days.
How is the housing crisis affecting your family? Tell us your story.For decades he's had designs on creating and selling homes, but after 9 months on the market, architect and builder Reinhold Schmid had to rent out his latest project and he candidly admits there's no work on the horizon.
"The bottom dropped out of the barrel basically," Schmid said.
No work for an architect now means no work for contractors later, and no houses for realtors to sell. Schmid blames it squarely on the credit crunch impacting more than just the barely qualified buyers.
"Other people who could get a mortgage they have to jump through hoops just to get a mortgage," Schmid said.
In the meantime realtors say owners hoping to get prices from yesteryear for their homes are finding their houses aren't selling at all.
"The past is history," said real estate agent Steven Sims. "We need to move forward if they have a motivation to sell."
In a survey of Coldwell Banker agents 77 percent said sellers have unrealistic price expectations and 79 percent said appropriately priced homes are attracting more buyers and selling faster.
To kick-start the market, Coldwell Banker is now initiating a 10-day, 10 percent price reduction in sale prices nationwide, starting Friday.
It would take $25,000 off the lowest-priced condos in an Evanston conversion, where not one unit has yet to sell. Agent Steve Sims says so far 20 percent of their sellers have signed on to the program.
"We believe by starting this it could catch on nationwide to possibly other brokers and reduce our inventory, which is what has to happen for positive growth," Sims said.
At the other end of the market, architects like Schmid say they're doing their best to stay optimistic.
"Deep inside I am probably as scared as anybody else out there," he admitted.
The inventory of unsold homes fell to 4.3 million, down from the all-time record of 4.6 million in July. That still represented a 10.4-month supply at the current sales pace, far above the 5- or 6-month supply considered ideal for a balanced housing market. Inventories have been driven higher by a massive wave of mortgage foreclosures, especially on risky loans.
Home sales in the Chicago metropolitan area dropped 30.1 percent in August to 6,804 from a year earlier, and median prices dropped 5.7 percent to $251,250, according to the latest report from the Illinois Association of Realtors.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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