HOUSING MARKET FLOODED WITH CHOICES

As the spring selling season gears up, more homes are pouring onto the market. Home builders are finishing long-planned buildings and turning over those units to once-hungry-butnow-dreading-the-closing investors.

And those investors are turning around and listing their vacant properties for sale even as developers try to pre-sell new properties that won’t be finished for another three years.

Properties that are built but unsold continue to add to the growing inventory of housing for sale. The slump in housing, which most housing economists had predicted would end by midyear, is casting a longer shadow than expected on the economy.

It takes buyers and sellers to make a real estate market work. But increasingly, it looks like buyers are sitting back and taking stock.

The real question is when will buyers get in the game?

A bigger problem is that first-time buyers are having a tougher time qualifying for super-low down-payment loans. The subprime-mortgage market has dried up. Zero-down-payment loans have virtually disappeared from the marketplace except for VA loans, which are expensive and only available to qualified veterans.

If you don’t have at least 3 to 5 percent to put down on a house plus at least a month’s worth of expenses in reserve, qualifying for a mortgage is more difficult.

The numbers are staggering.

If just 5 percent of first-time buyers can no longer qualify for a home loan, that’s approximately 100,000 home buyers who are now sidelined.

That means 100,000 fewer houses will sell this year — at least. If half of first-time buyers don’t have the cash for a down payment, it could mean a million fewer homes will be sold this year.

Compounding the problem are the rising numbers of properties in foreclosure and the thousands of short-term, adjustable-rate mortgages that are scheduled to adjust in the next 18 months. Many of those loans will become unaffordable for their owners, and they will also go into foreclosure.

Banks will try to sell those properties, cutting the price to get them off their books. That might finally force sellers to get real about the true value of their property — and perhaps some price-cutting will help equalize the market.

For now, however, buyers seem to be sitting on the sidelines, waiting for something to motivate them to action.

Ilyce R. Glink’s latest book is "100 Questions Every First-Time Home Buyer Should Ask," 3rd Ed. Contact her at Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022.