More signs today that the housing market is cooling off

Date: February 28, 2006
Time: 11:00 AM - 12:00 PM
Station: CNBC
Location: Network
Program Morning Call

LIZ CLAMAN, co-host:
Tomorrow it's March, the month when spring begins and also when the big home buying season begins unofficially. Will it be a good season for buyers or sellers? We'll get some opinions on that. Keep it here, MORNING CALL will be right back.

JOE KERNEN, co-anchor:
More signs today that the housing market is cooling off. We had those new home sales earlier this week. Today January's existing home sales fell to the slowest pace in nearly two years.

So with home hunting season just getting underway, will this spring turn out to be a buyers market or kind of a little bit of seller's, little bit of a buyer? Let's find out what our next guests think, we have three of them.

Thomas Stevens is President of the National Association of Realtors. Bob Moulton, President of Americana Mortgage Group and Dave Jenks is co-author of "The Millionaire Real Estate Investor." (Visual of book "The Millionaire Real Estate Investor")

I'll start with you, Mr. Stevens. What do you think? Are we just in balance now or is it actually now a buyer's market?

Mr. THOMAS STEVENS (President, National Association of Realtors):
Well, we're not really seeing a buyer's market in most parts of the country. What we're seeing is prices have moderated somewhat. Interest rates, you know, started creeping up towards the end of a last year and sales started to taper off a little bit.

We couldn't continue with the pace that we were at; the last two or three years have just been such a robust market with every year for the last three years setting all-time records.

So we're seeing a little moderation in pricing and home sales, prices still remain at double-digit appreciations and we think that we'll sustain that through the end of the year.

KERNEN:
I hear that a lot from representatives of the industry. I hope you guys aren't just whistling past the graveyard.

Bob Moulton, President of Americana Mortgage, what do you think? Is that your feeling?

Mr. BOB MOULTON (President, Americana Mortgage Group):
I think we're starting to see a transition, actually, to a buyer's market. We're seeing a lot more inventory, we're not seeing the frenzy that we saw for last few years with numerous bidders bidding on the same house and prices are staying firm. But buyers are not coming up and they're not bidding against themselves.

So with the inventory at an almost eight-year high I think we are going to slowly change into a buyer's market from the seller's market that we've seen for the last five or six years.

KERNEN:
And, Bob, what's your--you had a forecast on mortgages this year versus last year, it was a substantial decline. What was your forecast?

Mr. MOULTON:
Well, this year I was forecasting to be in the high sixes by 2006. We're up about 50 basis points. January '06 versus January '05.

KERNEN:
Mortgages written versus last year?

Mr. MOULTON:
Mortgages written we're down actually because the refinance market really peaked out in 2003, 2004. So total mortgages written were down last year versus the prior year.

KERNEN:
All right, Dave Jenks, weigh in on all these issues.

Mr. DAVE JENKS (Co-Author of The Millionaire Real Estate Investor):
It's great time for investors and first-time buyers. The market stabilizing is a good thing; the inventory growing is a good thing.

There are more choices out there for first time buyers; there are more choices out there for investors.

The underlying economic factors are strong, so that we're not looking at any kind of burst of a bubble; we're really looking at a kind of a rounding off of the top.

As was said before, the hot market we've experienced last four years just wasn't going to continue. It stabilized, that's good for everybody.

KERNEN:
Mr. Stevens, is this partly due to the speculators now definitely, being out of the market to some extent--or not in the market as much?

Mr. STEVENS:
Well I think you're seeing some of that but, you're still going to see a lot of investment in the real estate market. Because when you can return appreciations of double-digit figures, you know, that's a good return. So we'll continue to see the investors playing a role in the marketplace.

What you saw, as far as these numbers goes, that these are actual settlements. So these were contracts that were written in the December, January time frame and interest rates peaked in November. They were at highest level in three years.

So, they have started to come back down and you have to also remember that these were contracts that were written at the end of the year where people have other things on their mind like the holidays. So we're looking for a very strong sustainable market, the January market. Go ahead.

KERNEN:
Were condos down worse than single family and the existing side of things? Wouldn't that indicate speculators are at play here too?

Mr. STEVENS:
Right. Condos were off about 10 percent where as single families were about 1.5 percent. So condos and co-ops were off more so than the single family price.

KERNEN:
Bob Moulton, what--the numbers that we've seen recently, what is the most disturbing?

So, if you do take that condo figure into account and you look at the new home sales that we had on Monday, is it the inventory that we've seen, the highest ever for new home sales and the highest since, I think, I don't know, late '90s for existing sales? Is that the worst omen that we have for perhaps a hard landing?

Mr. MOULTON:
You know, I think it will probably be a soft landing. I think when you get to the five month inventory number and even the six month inventory, that's more of a normal inventory.

What we had seen the last few years was a shorter inventory, which was not necessarily normal to the market that we've seen.

In terms of the condo and co-op market, I think you have a lot of investors, particularly in the Florida area and maybe in the Las Vegas area, investing in condos and I think those prices appreciated faster than single family homes and that's where you might see a softness in that market.

KERNEN: All right, Dave Jenks, you're going to get the last word here. You wrote, "The Millionaire Real Estate Investor," I want to be millionaire real estate investor. You say it's a good time for investors. What parts of the country are the most attractive right now for me to put some money down?

Mr. JENKS:
What the millionaire investors told us, the 120 that we interviewed and the book is based on, is that there are investment opportunities in every market. The key is not to be a speculator but to be an investor. And if you're going to be that, you'd better know your criteria, you'd better know how terms work and you'd better have a network of professionals helping you do it.

If you do that, there are good opportunities in every market. Certainly right now the central part of the country and the south is probably most stable with a consistent appreciation. It would be the safest buy for an investor.

KERNEN:
Wow! So, don't be speculator be investor and know what you're doing. That sounds like the stock market. Good advice wherever you are.

Thanks gentlemen. Tom Stevens, President of the National Association of Realtors; Bob Moulton. President of the Americana Mortgage Group and Dave Jenks, co-author of "The Millionaire Real Estate Investor."