When it comes to real estate investments, I like to say I have impeccable timing — all bad.

For example, at the end of February, a friend and I closed on a new construction condo. When we bought in to the property, it was 2004, and the real estate market was going strong. By last year, we knew our timing wasn’t just going to be bad, but awful. We just didn’t know how awful the market would get.

The March 2007 sales figures tell the story: Existing home sales dropped another 8.7 percent, the biggest drop in 18 years. New home sales rose slightly, but much less than expected, with sales running at nearly 24 percent behind last year. And the Federal Reserve announced that home sales continued to be weak through mid-April.

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-but-now-dreading-the-closing investors. And these investors are turning around and listing their vacant properties for sale even as developer try to presell new properties that won’t be finished for another 3 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 mid-year, is casting a longer shadow that expected on the economy.

Some people are still selling. Linda and her husband had just signed the listing papers when they sold their Chicago townhouse two weeks ago. The property hadn’t even made it into the local multiple listing service. Their neighbor has had his unit, identical to theirs, listed for over a year.

But instead of turning around and buying something new, Linda and her husband are going to rent instead. They’re still mulling over whether they want to live in the city or the suburbs. Until that question is decided, they’re taking their broker’s advice and renting on a month-to-month basis.

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? For those sellers who do want to buy a new home, they’re waiting to sell before they buy. Few are like Crystal, a radio producer based in the Atlanta metropolitan area, who got such a good deal on a new home that she was willing to take the risk.

“The builder gave us all kinds of upgrades to make this new house work for us,” she said. “On the selling side, we’ve followed our listing agent’s suggestions on fixing up our old house to sell and she thinks we’ll sell soon.”

“I hope so,” she added. “Carrying two mortgages is pretty expensive.”

A bigger problem is that first-time buyers are having a tougher time qualifying for super-low down payment loans. The sub-prime 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 no longer can qualify for a home loan, that’s approximately 100,000 home buyers who 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 these loans will become unaffordable for their owners, and will also go into foreclosure.

Banks will try to sell these properties, cutting the price to get them off their books. That may 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.

For my part, I’m cutting my price on my investment unit. I’d rather be sitting at the closing table than waiting for the market to start chugging again.

Published: May 10, 2007