U.S. economic troubles, including the compounding credit crisis, are taking a toll on the housing market, said real estate industry experts during a conference call Thursday hosted by real estate search company Trulia.
"Bad news is always the worst thing to hit the market, more than fact or reality," said Barbara Corcoran, a real estate veteran and author who founded Manhattan’s Corcoran Group and is a contributor to CNBC and NBC’s "Today Show." It takes a "brave soul" to be in the market these days, she said.
The heavy focus on the proposed federal mortgage bailout plan, which could cost hundreds of billions of dollars, has definitely hurt the housing market, said Corcoran, causing some would-be buyers to "run for the hills" and to "position themselves on fences and wait this out." She likened the "battered market" to "a sail fluttering in the wind."
"I feel like I’m watching the American Dream disseminate … disappear in air," she said. "People these days are more willing to drop their house than to drop their credit card."
Jonathan Miller, co-founder of Miller Samuel Inc., a Manhattan real estate appraisal and consulting company, said the nation must fix the credit crisis before the housing market can mend, adding that he expects the recovery curve to look more like an "L" with a long leveling period after the sharp downturn than a "V" with a sharp upward trend following the downturn.
There are too many unknowns to predict a bottom in the market, Miller said. "There are a lot of problems on the table right now and frankly, there isn’t much in the way of tangible solutions. I really don’t know what the plan is going to be by the government yet, in its final form."
He also said he doesn’t expect much to change in the next six months, and he does expect it could take two to three years to sort out the nation’s credit problems. The nation is in about the second or third inning of a game, he said, so there is still some ways to go. "At least (there is) some progress."
The Manhattan market — one of the last U.S. real estate markets to feel the effects of the housing downturn — will be hurt by the Wall Street layoffs and dramatic drop in bonus pay but is still in "a fairly good position" heading into the weaker economic times, as there was not widespread speculation as seen in some other hard-hit markets and the for-sale inventory level is "rather modest."
Corcoran said she is not optimistic that the federal government’s very active involvement in resolving the credit crunch will find quick solutions. "Just figuring out the rules, regulations and handling the new printed paperwork takes six months alone," she said.
A major housing bill passed by Congress on July 30, HR 3221, doesn’t do enough to solve housing market problems, Corcoran also said, adding that she hopes for more substantial help for homeowners in the latest congressional effort.
"We really need a leader to come up to the plate to make a big, sweeping change," she said.
David Michonski, chairman and CEO for Coldwell Banker Hunt Kennedy, a Manhattan-based brokerage company, said that the median price has been a bit unpredictable lately — "it’s what we call a ‘sloppy bottom’ here that the market is trying to find," he said.
Foreign buyers have helped to prop up sales, he said, and the company’s agents report that about 40 percent of transactions each month are with international buyers.
Miller said that some foreign countries are starting to feel the weight of economic problems too, so the foreign market may not be as dependable moving forward.
Michonski also said he is hopeful that the tightly wound spring of buyer demand — fueled by the simple demographics of a growing U.S. population — will help the housing market to rebound.
Pete Flint, CEO and co-founder of Trulia, noted that the company has commissioned a study which found that the so-called American Dream of homeownership is definitely not a dream shared by all. Less than half of the respondents said that homeownership is a great long-term investment, for example, Flint said, and about 56 percent said that homeownership is "part of achieving the American Dream."
"So the question we have: Is this a knee-jerk reaction or is this a part of a fundamental change in the U.S. economy?" Flint said. "What does homeownership mean to buyers and sellers today?" He said the company plans to release the full results of the survey soon.
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