Housing: It's a Buyer's Market

July 30, 2006 — -- In Danbury Conn., where the Bates family is looking for a house, "for sale" signs are multiplying.

Around the country, houses that used to sell in days are now sitting on the market for months. After five years of paradise for sellers, once again it's a buyer's market -- and the Bateses are hoping to cash in.

"You see a different couple of houses and don't feel like you're under pressure," Markus Bates said.

The pressure now is on sellers, and especially builders, as the market is saturated with a record glut of unsold homes for buyers to choose from.

Three-fourths of builders are now offering extravagant incentives to close a deal -- such as installing swimming pools, throwing in plasma TVs, even dangling first class tickets to Hawaii.

"In terms of closing sales, they have got to offer significant discounts," said Ivy Zelman, housing analyst for Credit Suisse First Boston. "I have builders right now who are advertising make me an offer, which is definitely scary."

Last week, the National Association of Realtors reported sales of existing homes were down in June and the number of homes for sale soared to their highest point since 1997. The association's chief economist said he expects "price numbers to start deteriorating," though he still projects home prices will be up 5.3 percent for the year.

"I tell people … that you probably won't be able to flip a house in a year and make a profit in this market," said Allyson Bernard, a Connecticut realtor. "But if you buy a house and sell it in three to five years, then you'll probably make out okay even if the market isn't that great."

The market has gone chilliest in areas where it was hottest -- California, Arizona, South Florida and the Northeast -- with some reporting double digit sales declines. For example, last week the California Association of Realtors reported that home sales are down 26 percent since last year and off 20 percent for the year. Nationally, the inventory of unsold homes rose to 3.73 million.