Business

HOMESICK MARKET

By
Social Links for Tracy Byrnes
Published March 11, 2007, 9:00 a.m. ET

With the spring selling season about to hit, homeowners looking to sell and pocket a huge profit are hoping the real estate funk ends quickly.

But, experts say, don’t count on it.

“It’ll probably be 2008 before the housing market bottoms,” says Mark Grinis, a partner in Ernst & Young’s Real Estate, Hospitality & Construction group.

That’s because there are a higher number of unsold homes – both new and existing – on the market then we’ve seen in a while. “And that excess inventory will force sellers to lower their prices,” notes Zoltan Pozsar, an economist at Economy.com.

So don’t be fooled by the recent news that sales of existing homes unexpectedly rose 5.2 percent in February, according to the National Association of Realtors, breaking a five-month losing streak.

It’s not enough.

The good news is that “we’re much closer to stabilizing than falling off a cliff,” says Michael Darda, chief economist at MKM Partners in Greenwich, Conn.

He notes that existing home sales are sitting on the market for about 6.6 months these days, compared with 7.4 months in October.

One fly in the ointment is the trouble pulsing through the sub-prime market. That’s the sector of the mortgage industry that gives loans to folks with little or no credit. So folks with “sub-prime” credit were given cheap loans on properties they couldn’t afford.

And though Treasury Secretary Hank Paulson said the “sub-prime market was contained,” you can’t help but worry about the slacker next door who can’t pay his bills.

The bigger problem is that if more people default on their mortgages and are forced into foreclosure, other sectors of the economy will be affected. If people aren’t buying homes, then they’re not buying washers and dryers, using interior decorators or hiring handymen to fix faucets either.

“The housing market has been a major contributor to the broader economy as home prices have increased. The inverse will also hold true,” reminds Grinis.

Bucking the slowing trend nationally and in the Northeast, New York is on fire again. Thank Wall Street bonuses, increasing rents or New Yorkers who just get on with their lives and don’t worry about bubbles bursting “Over-bidding is back again,” says Barbara Corcoran, the queen of New York real estate brokers. She says “properties that once languished are now confronted with three bidders.”