A soft real estate market is leaving some buyers with one house too manyBy Brenda J. Buote, Globe Staff
July 9, 2006
SourceJan Pelligrini had been searching for her dream home for the better part of two years when she finally found it nestled on a hill in Gloucester.
``When I drove by the house, I thought, `My agent is crazy, this is not a home I would even consider,' " she said. But she decided to take a peek inside anyway, just to kill some time while her agent held an open house at her condominium.
``I walked in and I knew immediately," said Pelligrini, 52, an entrepreneur with a bustling catering company in Beverly. ``I fell in love with the soapstone sink in the kitchen and all of the home's wonderful architectural details -- the beadboard wainscoting, the French doors, and the crown molding."
Seduced by the Victorian's charm, Pelligrini submitted an offer, confident her waterfront condo would be snapped up quickly. Located on a quiet dead-end street, where gravel gives way to the gentle waters of Gloucester Harbor, the first floor, two-bedroom unit boasts sweeping views of Rocky Neck, bamboo floors, and a gourmet kitchen with top-notch appliances and granite countertops.
But Pelligrini's confidence was misplaced. Real estate sales were on the decline, even in the condominium market, which had at first withstood the housing slowdown. And now, five months later, she's carrying mortgages on both properties.
The decline in real estate sales, coupled with a surge in the number of available properties, is forcing some sellers into a bind. Already smitten with a new home, they must make tough decisions. Do they slash their asking price in order to unload their property quickly? Do they let their dream home slip through their fingers while they wait for the right buyer? Or, like Pelligrini, do they juggle two mortgages -- indefinitely?
According to data from the MLS Property Information Network, New England's largest real estate listing service, the number of condominiums on the market in the northern suburbs last week was up 46 percent over what was available at this time last year. The number of single-family homes up for sale in the region is also much higher: 2,666 last week, compared to 1,972 a year ago.
But the number of homes sold is declining. The Warren Group, a Boston firm that tracks and publishes real estate data, recently announced that sales of detached single-family homes fell 5.1 percent in May, to 5,208 homes sold, compared with 5,488 in May 2005. It was the fifth consecutive month that house sales had declined, according to the firm.
Pelligrini said she is aware of the sobering statistics, but is still surprised that she's having such a hard time finding a buyer for her condo. She's already lowered her asking price -- twice -- from $435,000 to $399,000. She refuses to slash it further.
``I never thought I wouldn't sell the condo because things were selling so quickly," she said.
But real estate is a lot like the stock market: A few months can make a world of difference.
A year ago, buyers in that price range might have been in a bidding war, willing to offer a lot more than Pelligrini's original asking price, according to real estate agent Ellen Tibbetts with Del Realty in Danvers. But, she noted, the market began to cool last fall as the Federal Reserve's series of interest-rate increases pushed mortgage rates higher, making it more expensive to secure financing.
``The market just came to a screeching halt," said Tibbetts, who has been a realtor for 12 years. ``I've gone without a pay check for six months now. It's prompted my husband to start calling what I do `volunteering.' "
The drop in sales is bad news for many of her clients, including Chris and Heidi Schrock, who, like Pelligrini, own two properties: A three-bedroom ranch with vaulted ceilings in Hamilton and a cozy four-room Cape Cod-style home in neighboring Wenham. The Schrocks' Hamilton home has been on the market since last July.
``We've had a string of open houses since February, and multiple private showings," said Heidi. ``It's tiring. People will say they love the house, but then they'll tell me they have 10 or 12 other listings to go to. There's just too much inventory out there right now."
In hopes of attracting the right buyer in an increasingly competitive market, the Schrocks have lowered their asking price by more than $70,000 over the past year, to $422,500. To date, they've had only one offer, of $476,000. But that was last fall, before the market cooled, when the Schrocks thought they could do better.
``The offer came with a lot of contingencies, and at the time our home had only been on the market a few months, so it was a no-go," said Chris, 35, a general manager at Electrolux.
``We had already purchased the Cape, and knew we could swing the mortgage payments on both properties, so we took a calculated risk," added Heidi, also 35, and a national account manager for Time, Inc. ``Real estate is always a gamble."
Anne Smith, a realtor with Remax Advantage in Beverly, is advising some of her clients to hedge their bets. Her advice: If you get a reasonable offer, think about accepting it, but add a clause that allows you to continue showing the house in the hopes of getting an offer that does not have contingencies.
Her clients, Harry Xenelis, and his former wife, Diane, did just that. When they finally got an offer in May on their five-bedroom Ipswich home, they quickly accepted it with the provision that they would continue to show the house. In the end, no one else came forward with an offer. The home sold for $400,000 on July 6. It had originally been listed in September 2004 for $469,000.
``We didn't get what we wanted, but it was a livable price," said Harry, 60, who is settling into a new condo, also in Ipswich. ``I couldn't afford to buy my new place until we sold our old house."
The anemic housing market has prompted some real estate agents to advise their clients to hold off on house hunting altogether until they get a solid offer on their own home.
``Of course, if a seller is able to complete the sale, from soup to nuts, before moving forward on the purchase of another property, that's even better," said Martha Anger, also an agent at the Gloucester Carlson GMAC firm.
Sage advice, perhaps, but is it practical?
Randy Greenstein isn't convinced. An account executive in the sales department at ``Kiss 108" WXKS-FM (107.9), he and his wife bought a home in Lynnfield in December, a month after listing their three-bedroom contemporary in Peabody for $629,000.
``The owners of the Lynnfield house needed us to close in order to close on their other place," said Greenstein, 30. ``They were friends of ours, and so I agreed, but I never thought this would happen. I never thought [the Peabody home] would last on the market."
To make the deal on the Lynnfield house work, the Greensteins took out a bridge loan to cover the down payment, confident that they would be able to pay off that debt once they sold their Peabody home.
At first, it seemed their wager would pay off. After lowering the asking price to $599,000 in early February, they received and accepted an offer for $560,000. But the deal fell apart in March when the buyer had trouble securing financing. Over the next few months, the couple fielded four more offers, each one lower than the last. The most recent bid came two weeks ago. It was for $425,000.
``It was insulting," said Greenstein, who rejected the offer. ``I mean, look, I'm not going to give the house away. I'm not desperate."
The couple's difficult climb up the property ladder has become the subject of ongoing banter on the ``Matty in the Morning" radio show. Host Matt Siegel likes to rib Greenstein about rising interest rates and the bite his housing conundrum is taking out of his paycheck.
In all, the Greensteins' housing costs add up to about $6,400 a month: $3,000 for the Lynnfield home; $2,400 for the Peabody property; and $1,000 on the bridge loan.
``You can't buy before you sell, unless you know you can swing the payments -- for years," Greenstein said, deadpan.
Pearls of wisdom from a man stuck in a financial pressure-cooker, but even his own parents aren't listening. They are in the process of buying a new condo on Revere beach. Their home in Nahant has not yet sold.
Brenda J. Buote may be reached at bbuote@globe.com