Homebuyers balk amid Wall Street meltdown

The Dow has lost over 2,200 points in the last seven trading sessions - and that's giving the few homebuyers that are out there right now reason to reconsider.
The National Association of Home Builders (NAHB) for instance has seen its contract cancellations spike recently to as high as 30%, compared with an average rate of about 20%. During the housing boom, as few as 5% of sales were cancelled.



"The events of the past couple of weeks have people's heads spinning," said Steve Melman, NAHB's director of economic surveys.

The National Association of Realtors (NAR) estimates that there are about 25% fewer people shopping for homes than there normally would be at this time of year. Potential buyers are worried about their jobs, their declining investments and falling housing prices, which is keeping them on the sidelines, according to spokesman Walter Molony.

"You have to have a lot of confidence to make this kind of big-ticket purchase in the current environment," said Molony.

Real estate agent Bob Rose was helping one couple look for an investment property in battered Contre Costa County, hoping to find a bargain that they could sell in a few years.

Then, on September 29 the Dow dove nearly 800 points and the couple decided not to buy. "They told me they had lost about a quarter of their retirement portfolio," said Rose, and that they could no longer afford it.

Even some buyers who are already in contract are managing to pull out of sales amidst all the economic turmoil.

Deal or no deal

Two weeks ago, one Washington state couple, Sharif Tai and Gaby Ghafari, went into contract on a new $450,000, three bed, three bath, house in central Seattle. Soon afterwards, the stock market began its steep descent.

"It wasn't that we lost money [in the market] or that we were worried about our jobs," said Tai, a software developer in his mid-20s, "but we thought we could get a better deal, so we decided to wait."

The couple backed out of the deal by citing problems with the inspection, but they haven't given up on making a purchase.

"We're keeping our eyes out," said Tai. "We want to see how things shake out. If we see a great deal, we'll take it."

Other buyers are demanding sweeteners before they close a deal during such a rocky time. San Francisco agent Jim Holt had clients go into contract on September 29, on a $750,000 home in town. But by the end of the week the Dow had lost over 800 points and the buyer demanded a whopping $50,000 price cut.

"Buyers are seeing the [market implosion] as an opportunity to get concessions," said Holt. In the end, the