Pricing Spectrum holds key to recovery

Baudo reported the company focuses on homes $400,000 and up but notes most sales have been in the $1 million-plus range. “We are...gearing up to meet the demand as our pipeline continues to fill up,” Baudo says.

The reason this caught my eye is that it jibes with the scuttlebutt I'm hearing where I live in Sarasota, Fla., from some of the local Realtors who have been telling me that existing waterfront homes are beginning to move again — at discounted prices — to wealthy snowbirds pouncing on bargains with cash.

For some time, I've held the opinion that new home sales in just about every market will come back from the far edges of the pricing spectrum long before anything starts to happen in the fat center of that spectrum. The pricing middle is where the bulk of the inventory is — both new and existing homes. But if you can't afford the midpoint price or your interest is above $1 million, you're not going to be as inclined to wait for a clear sign that prices have bottomed — which is what most potential home buyers are doing.

Entry-level buyers will jump back into the market when they are able; a government stimulus program with down-payment assistance and below-market rates on 30-year, fixed-rate FHA mortgages would move them back into the market. Young families are still forming and eager to own. New home builders can get a share of that business with better prices, better locations and products targeted specifically to this market segment, demographically and psychographically. When you talk about pent-up demand,entry buyers are who come to my mind.

That's why I believe home sales will recover from the edges of the pricing spectrum, and that's where you shouldlook for signs of recovery in your market. Maybe some buyers are already there. Maybe a federal stimulus program, later this winter, will unleash them.