Why Sellers Should Cut Prices

By Lauren Baier Kim

Here's a look at what's new in real-estate markets across the U.S. from around the Web. (Some links may require registration or subscriptions.)

Hope for borrowers in California

Under a plan announced last week by Gov. Arnold Schwarzenegger, help may be on the way for half a million California homeowners whose subprime mortgages are due to reset to higher interest rates within the next two years, says Carolyn Said in a San Francisco Chronicle article.

According to the story, four lenders -- Countrywide, GMAC, Litton and HomeEq -- have voluntarily agreed to maintain the initial lower interest rates on mortgages for these borrowers, as long as they live in their homes, are making payments on time and can prove they cannot afford to pay higher rates, the Chronicle says.

It's not known how long lenders will freeze rates, but Larry Litton Jr., chief executive of Litton Loan Servicing, says his company will maintain the initial interest rates for as much as five years. Such a move may make sense for both investors who hold the loans and for homeowners: "It feels like a no-brainer for a loan servicer to keep the payment where it is, keep another piece of real estate off the market and keep the borrower in the house," Mr. Litton says in the article.

Forget the incentives -- cut the price instead

Thinking about throwing in a new car with your home sale, or perhaps offering your broker a bonus to move your property? Forget about it. Price discounts are the most effective way to get your house sold in today's housing market, according to a Bloomberg.com article by John F. Wasik. "Buyers just want price," he quotes one real-estate broker and consultant based in Stuart, Fla., as saying. "Buyers have become more educated and they can easily cut through the fluffy incentives," he says.

Related Links

Read news and analysis on the housing market at WSJ.com's Developments blog.

More Open House columns

Mr. Wasik notes that about 2 million homes may fall into foreclosure this year and that living near such a property could slash as much as $5,000 from your house's value. In many markets, homeowners should offer an asking price that's at least 10% below the competition, he says. He points out that in Boston and in Calif.'s Orange County and Sacramento, more than half of the homes on the market have already been reduced.

Brits snatch up U.S. homes

Americans may have hit the malls on Black Friday, but across the pond, Britons are looking for a different kind of bargain -- U.S. residential real estate, says an article in the London-based the Observer. With the exchange rate above two dollars to the pound and with housing prices on the decline in the U.S., Brits are buying up stateside holiday homes, selling their own U.K. properties to relocate to the U.S. and even purchasing U.S. residential real estate in the hopes of renting it out, the Observer says. Twenty percent of overseas buyers in the U.S. are purchasing for investment purposes, while about 50% are buying second homes, the newspaper says. Top places of interest for British buyers are Manhattan, California and Florida, the article says. "People can't believe the amount and type of property you can get," says the owner of one Florida firm who advertises to overseas buyers. "They would expect to pay twice that amount for the same thing in the U.K."

Grosse Price Declines

Grosse Pointe, Mich., is one of the most exclusive suburbs of Detroit, but it's now a place "Where Mansions Go Begging," according to the headline of a recent New York Times article by Keith Schneider. Mr. Schneider notes that since June, home prices in the exclusive suburb have been dropping by about $100,000 a month. Homes on the market number at 700 -- twice as many as there were at the same time in 2005 -- and may take 12 to 18 months to sell. Sixty homes foreclosed in the suburb this year as of last month, the article says.

For instance, one home buyer mentioned in the article purchased a 5,900-square-foot house in the area for $1.5 million, or $500,000 off the asking price.

Grosse Pointe has been hit by the same slump that's affecting the general Detroit area, where housing prices have dropped at least 20% in the past year, the article says. There are 41,000 homes on the market, twice as many as there were in 2005, and thanks to a flagging auto industry, the state has an unemployment rate of 7.7%, the highest in the nation.