Ready for some good news about the housing industry?
Try this: as 2010 approaches, mortgage rates are at relative lows of around 4.5 percent to 5 percent. Existing and new home inventories are down after ballooning to unhealthy levels early in 2009. Home prices seem to have stabilized. There’s pent-up demand from buyers and sellers who for more than a year have resisted getting into the market.
And last, but not least, a federal tax credit stimulus has been expanded and extended until April.
Of course, problems remain -— most noteably Triad unemployment is above 10 percent and credit remains uncomfortably tight. But there is just enough of that good news to have real estate agents, builders and economists feeling better, if not exactly giddy with optimism.
“I think it will be a flat, stable year,” said Mark Yost, principal of Greensboro-based Yost & Little Realty Inc. “I think we’re done free-falling.”
Agreed Don Jud, professor emeritus of economics at UNC-Greensboro: “I don’t expect a really robust market, but I do think we’ve turned.”
Only after a year like 2009 could the prospect of a little stablity and modest sales gains seems like good news. Year-over-year sales of new and existing single-family homes in Alamance, Guilford and Forsyth counties decreased 28.4 percent, to 6,338, through the third quarter, according to Rocky Mount-based Market Opportunity Research Enterprises.
Median home prices through the third quarter declined 2.6 percent, to $154,000.
Expect much of the initial emphasis in the industry in the year ahead to be in lower price ranges — under $200,000 — one of the few brights spots in both new and existing home sales in recent months. Data from Market Opportunity Research show that homes under $200,000 accounted for nearly 70 percent of sales through the first three quarters of 2009.
Several builders, including Grover Shugart, president of Winston-Salem-based Shugart Enterprises, said they’re trying to capitalize on that.
Shugart said his sales in 2009 will likely be off about 30 percent to 40 percent, compared to 2008. To improve sales in 2010, he undertook a project recently to design more homes under $130,000.
“Under $200,000 is still where the activity is, and really and truly, we’re focusing everything under $200,000 into next year, he said.
Even builders who specialize in homes in higher price ranges are looking to scale back their offerings.
Donnie Canaday, of Canaday Custom Homes in Summerfield, which sells homes starting at $500,000, said he’s looking at some lots where he could build houses that cost about $350,000 next year.
Canady said he knows he needs to find a way to attract clients who lost money when they sold their house or who simply cannot afford a million-dollar home anymore.
“It’s something we’re all going to have to do until this thing turns around,” he said.
Lingering concerns
But even with positive indicators, there are looming issues.
The inventory of new homes in a five-county Triad area has fallen by a third, to 1,350, in the last year and is only about 450 homes too many, according to Edsel Charles, president of
Nashville-based MarketGraphics Research Group. But existing inventory remains too high. According to data compiled by Jud, there were 10,628 existing homes on the market in an eight-county Triad area in the third quarter, a 13-month supply. A normal inventory is about 4 to 5 months.
That means more competition for new home builders, as well as continued pressure on prices. Until that inventory declines, it will be hard for the new or existing market to improve significantly, said Bernard Helm, president of Market Opportunity Research.
Added to that, the N.C. Commissioner of Banks is predicting that the rate of foreclosures will likely peak next year, potentially adding to the inventory of existing homes.
Real estate agents and builders say financing also will remain a challenge, making it hard for buyers to get a mortgage, even at good interest rates.
Job losses have slowed, but the area needs to see positive job growth next year in order to get more homes sold, say agents and builders.
All of those factors could still hold the housing market back in 2010.
“If the economy doesn’t continue to recover, the real estate market will deteriorate further,” Jud said. “For the real estate market to get better, the economy has to turn around. But I think there’s a reasonably good prospect of continued recovery.”
Reach Laura Youngs at (336) 370-2913 or lyoungs@bizjournals.com.
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