The past month wasn't exactly a confidence-booster for would-be home buyers and sellers. They've witnessed a turbulent stock market, a downgrade of U.S. credit, a spreading European debt crisis and a U.S. economy that seems to be running in place.
And now, many say they're even more hesitant — a retreat that could further delay a rebound in housing. It could hold back the overall economy, too.
"I have people who are just waiting and waiting, who just haven't pulled the trigger even though they have the down payment," said John Stearns, senior mortgage banker at American Fidelity Mortgage outside Milwaukee. "There's a lot of kicking tires. A lot of people saying they just won't do it."
Their unease explains why applications for home mortgages sank last week to a nearly 15-year low. What's more, sales of new homes fell more than expected in July — and analysts think the financial turmoil may accelerate that slide this month.
Stanislaus County home sales prices — like those statewide — fell in July to a median $130,000. That was $2,136 less than in June and $10,000 less than in July 2010. Prices declined statewide to a median $252,000, which was down $1,000 from June and down $16,000 from July 2010, according to sales data compiled by DataQuick, a real-estate research firm. Sales volume was down just about everywhere.
The valley's economy has been in a tailspin since the housing price bubble burst more than five years ago. That triggered record foreclosures, business failures and soaring unemployment.
While some analysts believe the valley's economy has hit the bottom, they're unsure when the rebound will come. And the latest economic setbacks aren't helping. "Buyers just don't want to commit to anything right now," said Joel Naroff of Pennsylvania-based Naroff Economic Advisors.
Interviews with more than three dozen agents, brokers and would-be buyers and sellers indicate that the heightened uncertainty in the financial markets and the economy has made people even more cautious than before.
Consider:
• Eric Younan, a marketing professional at an accounting firm who was about to buy a home in July in Farmington Hills, Mich. Then came August. "What really scared me is that I'm a single guy, and I don't want to have a mortgage by myself," Younan says. "The economy is taking a pounding, and my friends who are getting laid off are leaving the state. Prices are still falling. So I'd rather have money in the bank than money in a house."
• Fernando Maza, a security system programmer in Broward County, Fla., who was about to buy a second home, right before the stream of unnerving developments in the economy and the stock market. Now, he's less sure. "House prices could go down," he says. "There's so much inventory and not a lot of qualified buyers."
• Kurt Winiecki, a financial planner in Chicago who has been counseling a young couple on whether to buy or continue to rent. August made Winiecki's decision easier: He's telling them to rent. "What if they lose 20 percent of their equity and they can't sell the house? It's just too big a risk."
Even before the recent financial upheavals, the home market was being depressed by the economy's many problems: High unemployment. Stagnant pay. Rising health care expenses. High debt loads. A wave of foreclosures. Shrunken home equity.
And real-estate agents were saying that more buyers were walking away at the last minute. In June, the latest month for which figures are available, about 16 percent of closings were canceled. That was the highest figure since record- keeping started more than a year ago.
This year is on pace to be the worst for home sales in 14 years. Nationally, prices are at 2002 levels, and even lower in areas such as Phoenix, Las Vegas and Tampa, Fla.
The past few weeks' turmoil may be making everything worse. Home-builder stocks have been battered — more than the stock market as a whole. As a group, they've shed nearly 23 percent, according to a Standard & Poor's analysis, compared with about 12 percent for the Dow Jones industrial average.
In normal times, today's record-low mortgage rates would energize buying. Yet while more people are refinancing, applications for new mortgages are stuck at 10-year lows, according to Inside Mortgage Finance.
Part of the problem is that many people can't buy even if they want to. More than 23 percent of homeowners owe more on their homes than they're worth. An additional 25 percent have less than 20 percent equity in their homes, according to Capital Economics. That means that nearly half of homeowners couldn't qualify for a new mortgage because they couldn't produce a big enough down payment.
Add to that a chaotic stock market and a weak economy, and the belief is taking hold among many that now isn't the time to invest in the biggest purchase in most people's lives.
"There's a reassessment of risk across the planet," says Jonathan Miller of New York-based real estate consultancy Miller Samuel. "Volatility breeds uncertainty, and this is intimidating for consumers."
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