Mixed Messages for Would-Be Buyers in Spring Housing Market

Even as homes sales ramp up this spring, prices may continue to fall.


Home sales are up. Home values are down. Interest rates are rising. Inventories are falling.

Americans are facing an influx of information this spring home buying season, as the housing market continues to work out its kinks. Unfortunately, wading through all that information might seem like it requires an advanced degree in real estate.

"Consumers are going to be hearing a lot of mixed messages," says Stan Humphries, chief economist for real estate website Zillow. "They're going to be hearing how good home sales are but then they're going to hear that home values in, say, Tampa are still heading down and that can be confusing for them."

The wildcards remain foreclosure and other distressed property sales, which will likely further push down home prices this season as buyers scoop up bargains. That could make other would-be buyers rethink their plans to take the homeownership plunge. After all, it's hard to plunk down a gob of money knowing a home might be worth thousands less in coming months.

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Still, consumers shouldn't try to time the market. "Many consumers are really focused on trying to time the exact bottom of the market," Humphries says. "That can be a fool's errand."

Another reason home buyers shouldn't wait around until housing prices hit absolute bottom? Interest rates. They're super low right now and they really have only one direction to go: up.

"Consumers should not try to wait out the last few percentage points of a market decline and risk exposure on the interest rate side," Humphries said. "Some consumers might think they're going to avoid three or five percentage points of home value loss by waiting nine or 12 months, but if they incur increased financing rates, they've lost that financial equation. They end up paying more money in the long term."

Despite concern that some Americans could get cold feet when wading into the housing market waters this spring, overall the mood is optimistic and, contrary to what many might believe, a complete stabilization of prices doesn't necessarily need to occur before a housing market recovery.

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"We know that there's a path you have to get down to reach that point," says Budge Huskey, president and chief operating officer of Coldwell Banker Real Estate. But so far, that path is looking good. Home sales figures are improving and inventory is dropping, two "very good" leading indicators for this spring's housing market, Huskey says, .

"Our annual convention this past month had thousands of brokers attending, and many of them were more optimistic than they have been in years," he adds. "What they've seen in buyer inquiries and Web traffic, a lot of these leading indicators that would suggest that we're clearly moving in the right direction."

But it's a long process, experts say, and the housing market is inherently cyclical by season. Thanks to an unseasonably warm winter, the market has seen the spring bump a bit earlier, but sales probably won't peak until about June.

"We are at the start of the housing season where we start to see buyers move into the market and then sellers," says Jed Kolko, chief economist at real estate website Trulia. What makes this year different is the momentum coming from a slew of other encouraging housing data including starts, sales, builder confidence, and inventories.

"When we look at this year compared to last year, all indicators are pointing toward a stronger housing market," Kolko adds.


Twitter: @mmhandley