Long way to go
Published 9:22 pm Saturday, July 17, 2010
The numbers look good on paper, but area real estate agents say that in reality there is really very little to be excited about in the area’s housing market.
Judging by information from the Real Estate Information Network, home sales in Suffolk have been improving since a low in February, reaching a level in June that is 29 percent higher than a year ago.
Median prices are up 12 percent from the previous year, and the average house was on the market for 75 days before selling in June, down 24 percent from June 2009.
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But the numbers don’t tell the whole story, say at least two Realtors with extensive Suffolk experience.
“We still have a good ways to go to get back to anything that looks like normalcy,” said Harry Cross of ReMax Across Town Inc.
Although the market has been “pretty good” for homes priced below $225,000 or so, he explained, anything with a higher price faces problems.
Foreclosures on homes in the $250,000 to $400,000 price range have put a lot of price pressure on all homes in that segment, he said, and homes priced at more than $450,000 suffer from a dearth of buyers.
Billy Chorey, Realtor and owner of Chorey and Associates Realty Ltd., has an even dimmer view of the city’s real estate market.
“In my opinion, we have not hit bottom in Suffolk,” he said Friday. “Short sales and foreclosures are killing us.”
Home sellers face an unprecedented combination of factors, both men agreed. Interest rates remain at historic lows, and home inventories are high. Combined with the price pressure caused by rampant foreclosures, that means home prices are also unusually low.
Under normal market conditions, the combination would be expected to produce brisk home sales, eventually moving prices back up. But the effects of the recession — poor stock performance, dwindling IRA values, uncertain job prospects and the like — are keeping many buyers out of the market, despite the low prices, Chorey said.
“We should have people breaking the doors down to buy,” he explained. “But everybody’s scared. It’s a very frustrating market.”
Chorey and Cross also agreed on the damaging effects of the wave of foreclosures that has swept across the nation.
“We’ve got way too many foreclosures,” Cross said.
Foreclosures affect all the homes in a neighborhood, Chorey explained.
When, for example, a family defaults on the loan for its $400,000 home, the lender often finds itself forced to buy the house for its loan value. The properties are then put back into a market experiencing severe price pressures, and their sale prices are often lower — sometimes far lower — than their previous appraised value.
Because appraisers look at the recent sale prices of other homes in the area when trying to determine a value for a home that has been put on the market, the lower, post-foreclosure sale prices of homes nearby end up reducing the appraised value of other homes in the neighborhood, regardless of their mortgage history.
The effects are long-ranging, Chorey said, noting that the lower appraisals can reduce an owner’s home equity and, ultimately, the city’s tax base, which relies in large part on home values.
The bright spot in the real estate market, both agents said, is for buyers, who have lots of homes to choose from at artificially low prices.
“It’s a bottom-up looking market,” Chorey said, and many buyers are taking advantage of it. Cross said up to 90 percent of buyers are using the Internet to eliminate houses that are out of their price range and find the best deals for their dollars.
The lesson for sellers is simple, they agreed.
In this market, “You’ve got to price it right, if you want to be a part of it,” Cross said.