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Unemployment drives more home sellers to cut price

2010-08-11 06:55:40

By Lynn Adler Lynn Adler Wed Aug 11, 12:18 am ET

NEW YORK (Reuters) Owners cut prices on one-quarter of U.S. homes listed for

sale in July, a fourth straight monthly rise, as job market fallout trumped

record low mortgage rates, real estate website Trulia.com said on Wednesday.

Sellers in the 50 largest cities slashed $30.1 billion from prices on houses on

the market as of August 1, up from $27.3 billion in the prior month, San

Francisco-based Trulia said in a report provided to Reuters before official

release.

Unemployment near 10 percent, wage cuts, restrictive lending practices and home

values that have fallen below their mortgage balances have left many potential

buyers unable to take advantage of low rates.

"With one out of every four homes experiencing at least one price reduction,

sellers are feeling no relief this summer in a market climate of fewer

qualified buyers and widespread uncertainty about the job market," said Pete

Flint, Trulia chief executive.

The average discount on homes reduced at least once held at 10 percent from the

original asking price in July from June.

"If buyers are unqualified to buy, it doesn't matter how low interest rates are

or how discounted a home is," Flint said in a statement, adding that the

housing market will bounce around the bottom for months.

Unemployment remained at 9.5 percent in July but would have been higher if

discouraged Americans had not dropped out of the workforce.

The housing market is still gaining equilibrium in the aftermath of up to

$8,000 in buyer tax credits that ended on April 30. The credit forced sales

into spring months at the expense of summer activity.

During the spring sales rush, sellers cut prices by much smaller amounts

totaling $22.8 billion in March and $25 billion in April, according to Trulia.

U.S. 30-year mortgage rates averaged 4.56 percent in July, according to home

funding company Freddie Mac, and have since drifted to a record low under 4.50

percent.

Nonetheless, in half of the 50 largest cities, sellers last month lowered

prices on at least 30 percent of the homes for sale. Foreclosures continue to

weigh on prices.

The real estate market will keep languishing until the job market recovers,

said Trulia's Tara Nelson.

"Sellers need to continue to be very aggressive with pricing to compete against

all the low-priced short sales and foreclosures that they'll be on the market

with, for a long time to come," she said.

Minneapolis led in price cuts for a fourth straight month, with 42 percent of

listings lowered at least once. The average discount was 9 percent for a total

of $33.8 million in reductions, Trulia said, citing rising inventory and

mounting competition.

Las Vegas had the biggest spike in the share of sellers cutting prices at 18

percent, a 56 percent surge, while New Yorkers cut prices on 20 percent of the

listings, a 15 percent jump in the month.

Cities in California were among those with the largest increases in the share

of sellers slicing prices.

Price-cutting on luxury homes listed at $2 million or more had an average

discount of 14 percent from the original listing price, Trulia said. Homes in

this category account for less than 2 percent of total inventory, but almost

one-quarter of the total dollars slashed from asking prices.

(Editing by Dan Grebler)