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Wednesday, October 17, 2012 - 14:15

Reality Check: US Home Resale Recovery Taking Hold,Agents Say

--Thin Inventory Pushing Up Home Resale Prices
--Sept. Home Resale Demand Uneven Amid Election Distractions

By Claudia Hirsch

NEW YORK, Oct 17 (MNI) - Buyers continued to return to the bloodied U.S. housing market in September and early October, lifting existing-home sales activity year-on-year, while thin inventory pushed prices slightly higher, according to real estate agents.

Real estate agents from Southern California to suburban New York said a moderately paced recovery is finally taking hold. Buyers are confident that prices are no longer eroding, and they are more secure in their jobs. Sellers are pricing their homes more realistically than before, and sale contracts are coming in faster. But some homeowners are still hesitant to list their properties, hoping for higher prices in the not too distant future. This has left supply wanting, now that large quantities of distressed home sales have been cleared out and lingering new home inventory has been whittled down. Amid multiple offers, selling prices in many markets are inching upward.

Some Realtors said September brought a mild ease in demand, as political uncertainty amplified in the home stretch of the presidential campaign. But they are also convinced that pent-up demand will ensure the broader housing revival continues, regardless of the outcome in November.

"We have settled into a nice simmer here in the market north of New York City," said Chris Meyers, chief operating officer at Houlihan Lawrence, which handles property sales in New York state's suburban Westchester, Putnam and Dutchess counties. "We saw anywhere from 15% to 25% increases in closed sales in the third quarter, which are mirroring the pending sales increases we saw in the first half."

Meyers said a snapshot of activity on Oct. 15 revealed pending sales in Westchester County, the county closest to the city, that were up 40% compared to the same day a year ago, Putnam County's sales under contract ahead by 25% and Dutchess County's activity 47% higher. All three areas are seeing a nice fall uptick in demand and activity, he said.

Driving this brisker commerce is income security on the part of buyers, and their long-awaited conclusion that home values have stabilized, Meyers said. Average selling prices in southern Westchester are rising, and those elsewhere in his territory have stopped falling. But median prices in all three counties are still easing, reflecting a concentration of sales in the lower end of the market, he said.

Substantial price erosion in recent years has taken a toll on inventory outside New York City, Meyers said. Some would-be sellers are choosing to wait for higher market prices before listing their homes. Others have no choice but to hold out, because they now lack enough equity to roll forward into a move-up purchase. As a result, supply this year has hovered 10% to 12% below 2011 levels, he said.

He foresees median prices rising next year, but not at break-neck speed.

"Regardless of the election outcome, I think we are cyclically positioned for continued growth."

On the West Coast, a real estate agent in a pair of bedroom communities northeast of Los Angeles said the housing recovery accelerated over the summer.

"Our revenue is up 60% over last year, and the broader market is up at least 30%," said Tom Adams, franchise owner of Century 21 Adams and Barnes, with offices in Monrovia and Glendora, CA. "Inventory is so low that anything on the market that is even close to being reasonably priced sells real quick."

August was Adams' best month since 2005, but his growth pace cooled in September, when presidential election drama distracted some buyers, he said. October-to-date business is robust, far outstripping the 10% gain in closings he saw in January through April.

Tight inventory has started to push up prices, a trend that Adams hopes is slow-moving enough to be sustainable. Homes under $500,000 are priced 10% richer than in 2011. The high-end is also pricier. Competitively priced homes are selling in half the time they did last year, he said.

"I can't ever recall seeing inventory as light as it is today," said Adams, who has worked in the industry for 30 years.

He said would-be sellers' hesitance to list their homes is ebbing slightly. But he noted that limited supply is preventing some prospective move-up buyers from finding the home they want, so they are resisting selling their existing home.

More homes are listing at realistically low prices than were earlier this year and last, which is generating multiple bids, Adams said. Greater job security and stabilizing home prices, he said, are fuelling better demand.

A colleague of his in Phoenix said inventory constraints kept his year-on-year unit sales steady in September, but revenues rose in tandem with low-end home prices.

"We're still short of inventory, though we're seeing a few more sellers step forward," said Floyd Scott, the owner of six Phoenix-area franchises of Parsippany, NJ-based Century 21. He said the area's multiple listings service is reporting about 12% fewer transactions so far this year.

After surging across the board through April, prices on homes in the $200,000 to $500,000 range have leveled at about 10% above a year ago. Scott said vacation-home buyers from the Upper Midwest appear to have paused, and he suspects pre-election jitters are to blame as voters await certainty on future tax policy.

Home prices below $200,000, where supply is thinnest, have continued to firm and multiple bids are not uncommon, he said. Cash-paying investors in the low end are crowding out traditional first-time homebuyers, who are now eyeing new homes. He is co-brokering about 20% more new-home sales than he did a year ago.

In St. Louis, the home resale market continues to improve, though the seasonal dip in September from August was a little more pronounced than usual, according to Russell Nolting, of Keller Williams St. Louis, who manages a team of 200 sales agents.

"September I think had more to do with the election than anything," he said, and added that year-on-year gains were minimal. "There's a reluctance to make decisions on the part of everyone."

But he described a market that is "pretty balanced," with total volume up, inventory and days-on-the-market down and median prices creeping higher. His year-to-date closings are 12% ahead of 2011 amid growing demand.

"I think next year will be slow and steady progress, no matter who is president," Nolting said. "Values will go up, but it's not going to be gangbusters."

A real estate agent in Washington, DC said dry supply is stunting her fall sales, though commerce and prices in the broader market, including close-in suburbs, are strengthening.

"There's nothing to sell," said Bonnie Roberts-Burke, of Evers & Co. "Our inventory continues to decline."

She too has sensed some tentativeness among buyers. She said uncertainties surrounding the nation's political and fiscal path seem to be hitting area residents, who tend to be more politically plugged-in than most.

"It's like somebody pressed the hold button," Roberts-Burke said. But next year should bring a wave of buying and selling interest, and she expects her sales - and the broader market's - to accelerate.

In foreclosure-ravaged Las Vegas, inventory continues to shrink as fraud-prevention laws slow fresh foreclosures to a grinding halt, according to a veteran real estate agent.

"It's a very frustrating market," said Stacey Vitto, a sales agent at Realty One Group and a lifetime Vegas resident. "Inventory is worse than before, and people are pretty much sitting in their houses for free, not paying their mortgages."

Vitto said that despite plenty of buyer-clients, her October is so far a bust.

"First time buyers are getting beat out by cash buyers," she said. "And with this flood of investors, you're never going to have a town with stability. They create all-rental neighborhoods, and crime goes up."

Investor demand is also inflating median prices, she said.

Vitto said listings are so sparse that, in the last few months, she's seen an increased number of real estate agents collecting a so-called "buyer premium" fee of thousands -- in addition to their usual sales percentage.

"I call it an extortion fee, and until there's litigation against it, it will continue," she lamented. "That's the mentality around here. It's desperate."

The National Association of Realtors is scheduled to release September existing-home sales data on Friday at 10:00 a.m. EDT.

Editor's Note: Reality Check stories survey sentiment among business people and their trade associations. They are intended to complement and anticipate economic data and to provide a view into specific sectors of the U.S. economy.

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