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."
Cooling Hot Spots
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.
"But it's not just the region of the country, it's also the type of house: People in the mid-market range will be hit hardest," Bernard said. "I like to tell clients in this range the 'real' is back in real estate. So if it took you 90 days to move your home two years ago, it might take five to eight months to do it now. You just have to be realistic about that. Inventory and availability are up and buyers have more to choose from."
One of the reasons behind the drop in sales is higher mortgage rates. A 30-year fixed rate is up more than a point in the past year to around 6.7 percent. Bernard says another reason is that there is a "slow down in buyers."
"We've had so many new buyers get into the market in the last few years, but once a new buyer buys, we have to wait three to seven years for them to be ready to buy again," she said. "And right now we're in that waiting part of the real estate cycle."
Whatever the reason, Zellman said that high prices are things of the past for now.
"People are going to have to come to the reality that if they want to sell their house," Zelman said. "They're going to have to lower the price."
ABC News' Betsy Stark contributed to this report.