High Inventory Forcing Home Sellers to Slash Prices

Now that the federal tax credits for home buyers have expired, homeowners are being forced to drop their asking prices in order to compete with the excessive inventory of foreclosed properties in some markets. Real estate agents around the country are advising clients to do just that, and they are listening, albeit somewhat begrudgingly.

Almost one-fourth of homes on the market as of July 1st have already undergone at least on price reduction, as their owners struggle to catch the eye of buyers amidst the sea of heavily discounted foreclosures. The average size of reductions varies from market to market, and some markets have seen more price cuts than others. In Minneapolis, Minnesota, for example, the average listing has been cut by almost 10 percent of the listing price, and 40 percent of homes have been reduced in price. In Las Vegas, Nevada, meanwhile, just over 12 percent of homes have been reduced, by an average of just about 15 percent.

The expiration of the tax credits is just one factor driving down asking prices. With mortgage rates having remained low for some time, buyers are no longer prone to act quickly so as not to miss out; and inventory has risen steadily since April, so it is very much a buyers' market in the current condition. The Mortgage Bankers Association, meanwhile, reports new applications for financing at its lowest level since December 1996 earlier this month.

Real estate agents are advising many clients to wait out the current market, if they can, until conditions become more favorable for sellers, provided they do not have a lot of equity built up. Most analysts predict the market could turn around as early as next year's first quarter. For those with little or no equity in their homes, waiting could mean the difference between a regular sale and having to go through a short sale (selling the home for less than it's worth), which damages the credit rating of the seller.

Ron Parks has been buying Marin real estate for 27 years. Year after year he is one of Marin's top real estate agents. Ron specializes in all areas of Marin County, including Belvedere homes