Feature: State of Local Housing Markets 2010

All real estate is local. That statement may never have been more evident than it was in 2009. While some markets have recovered from the housing downturn, others are taking a little longer to return to normal. Still others survived the nationwide market collapse relatively unscathed.

The federal government stepped in last year with measures designed to prop up the struggling housing market. In February 2009, President Obama signed the American Recovery and Reinvestment Act into law, which included a provision for an $8,000 first-time homebuyer tax credit. And the passage of an expanded tax credit in November, which includes an additional $6,500 tax credit for current homeowners, has given many REALTORS® a reason to be optimistic.

The Residential Specialist spoke with several CRSs from around the country to take the pulse of local housing markets. They shared reflections of their markets’ performance in 2009, insights on how business has fared recently and predictions of what may lie ahead for the rest of 2010.

While the housing market in Tucson improved considerably in 2009, Lonnie Workman, CRS, with Long Realty, remains cautious about the future. Sales rose more than 35 percent over 2008, according to the local MLS data, driven primarily by an influx of first-time homebuyers who took advantage of low interest rates, greater affordability and the government’s first-time homebuyer tax credit. Investor activity also rose. Workman says the average time on the market at the end of 2009 was 73 days, with 40 percent of homes in the area selling within 30 days. Housing inventory declined from a 12.4-month supply in November 2008 to a 6.5-month supply at the end of November 2009.

Still, home prices have fallen to 2004 levels, Workman says. The median price of a single-family home in Tucson was $177,300 at the end of 2008, and after falling for much of 2009, it hovered near $162,500 for the last four months of the year, indicating that prices may have stabilized. Although foreclosures have increased, Workman says they account for only 14 percent of active listings.

Despite the increase in sales, Workman remains concerned about the future. “I think we’ll continue to see good sales through April, and then we might see a drop-off once the tax credit is no longer available,” she says. “I think we’ll also see more turmoil in the market, lots of ups and downs,” she says.

With an unemployment rate near 10 percent in the area, Workman thinks move-up buyers will remain on the fence. “I don’t think the expanded tax credit will push them to take action. I think there’s still a lot of uncertainty out there. People are living in fear and are sticking where they are rather than taking advantage of the opportunity,” she says.

Dan Vollmer, CRS, a broker-associate with RE/MAX Platinum Properties in Lynchburg, Va., says that unlike some housing markets that experienced a boom and bust in recent years, Lynchburg’s market has remained relatively stable. “What a home was worth in 2008 is probably what it’s worth now,” Vollmer says.

Quoting local MLS statistics, Vollmer says the median home sale price in November 2009 was $183,557, compared with $173,089 in November 2008. He attributes the market’s stability to the area’s diverse employment sectors and relatively low unemployment — 6.6 percent, according to the U.S. Bureau of Labor Statistics. “We’re not dependent on any one industry, and we’re not a big transplant area. It’s a good mix of new and long-term residents,” Vollmer says.

He estimates that first-time buyers purchased 70 percent of homes in 2009, and he hopes the expanded tax credit will encourage more buyer activity in 2010. “Buyers are keenly aware of how affordable homes are and that interest rates are a superior value right now. Sellers understand they have more competition, and the value of their home will likely hold steady. I think they are more realistic and they know what they need to do to sell their homes,” Vollmer says.

Prices for high-end homes continue to fall, but for the average homebuyer, “prices haven’t dipped that much, and I don’t expect them to in 2010,” Vollmer says. “2010 will be better than 2009, which was better than 2008, but I don’t see a big overall increase in sales.”

In Frisco, Texas, a suburban community of 100,000 residents just north of Dallas, 2009 began on a somber note, but the market improved steadily throughout last year, says Brenda Myers Thompson, CRS, broker-owner of Thompson REALTORS®. “Texas was one of the least affected areas during the economic downturn,” she says. “We did not hurt as much as other parts of the country because our housing market is stable. We’ve had small, steady positive increases in home values. Our housing is also more affordable; $200,000 can get you a three- or four-bedroom home with 2,500 square feet,” she says.

Sales were up 0.9 percent in 2009, Thompson says, citing figures from the local MLS, the North Texas Real Estate Information System, while the median sale price fell 2.2 percent from $230,000 to $225,000 for the year ending November 2009. But average time-on-market also declined from 113 days in 2008 to 98 in 2009.

Thompson says more move-up buyers are purchasing homes in her area, spurred on by the quality of life offered in Frisco. “It’s a small-town atmosphere with lots of parks and newer homes, excellent schools and easy access to the airport and expressways. But it’s also close to Dallas to commute there for jobs,” she says.

In Thompson’s eyes, there’s a lot to be optimistic about in 2010. “Low interest rates and the [federal homebuyer] tax credits will be huge for us. I think if rates continue to be low, activity should be good.”

Michael Tetreau, CRS, with the William Raveis Real Estate Company, says 2009 was the most challenging real estate market he can remember in Fairfield, Conn. By the end of November, 429 homes had been sold, down 13 percent from the 493 homes sold in 2008. The median home price was $565,000, down 9 percent from the prior year, when the median was $619,000. Overall, prices have fallen to 2003 levels, and inventory stood at 10 months at the end of November. “We have plenty of inventory, reasonably low interest rates and good access to money. All we are missing are the buyers,” Tetreau says.

Those would-be buyers are worried about their jobs, he explains. Many of Fairfield’s 60,000 residents work in New York City’s financial district, and their salaries set the price points for housing in Fairfield, where the average home price is $800,000 to $900,000. “If they have confidence in their jobs and that money will be there, they will be more likely to commit to larger purchasing decisions. But if the financial industry in New York takes a hit, that will affect the residents and their home situation,” he says.

After a rough start to 2009, sales activity started to pick up in the fourth quarter. According to data from the Greater Fairfield County MLS, October and November 2009 sales were 36 percent higher than the previous year, even though year-to-date sales were 13 percent lower compared with 2008. “This is giving everyone a boost,” says Tetreau, who believes home prices will hit bottom by spring. After that, “we could have six months of better news, the economy will be more stabilized, and people will want to return to a normal lifestyle.”

Eric Kodner, CRS, with Wayzata Lakes Realty in Minnetonka, Minn., says realistic home prices, increased consumer confidence and a wealth of listings in the Twin Cities pipeline make him optimistic about the rest of 2010. That’s a far cry from a year ago, when the local housing picture wasn’t as rosy.

“Our market was DOA at the end of 2008. The biggest single boost to our market has been the tax credit,” he says. “It has gotten buyer interest going again, got the market circulating again and restored liquidity.”

Through November 2009, sales were up 17.3 percent over the previous year, and the median sale price held steady at $170,000 for three consecutive months last fall, according to the Minneapolis Area Association of REALTORS®. Housing inventory stood at 5.7 months at the end of November compared with 8.5 months a year earlier, while the average time-on-market was 127 days, down from 149 days in 2008.

Lower-end homes in the $200,000 range are drawing the most interest, Kodner says, particularly from first-time home-buyers who are taking advantage of the federal tax credit. In fact, some homes are getting multiple offers. Meanwhile, some high-end homes priced at more than $1 million are languishing on the market or being sold as short sales. But Kodner says most bank-owned properties have now been sold, while foreclosures and short sales have stabilized.

The unemployment rate, which stood at 7.4 percent statewide at the end of 2009, according to the Minnesota Department of Employment and Economic Development, could put a damper on the recovery in the Twin Cities’ housing market, however. “People want to buy, but can’t because they are concerned about jobs. Until that becomes more stable, we probably won’t see a sustained housing recovery,” Kodner says.

In the unincorporated area of Silverdale, Wash., about 60 miles outside Seattle, 2009 wasn’t much of an improvement over 2008, according to David C. Jones, III, CRS, a broker with Windermere Real Estate/West Sound, Inc. Much of that has to do with the high percentage of foreclosures and short sales that have hit the market.

Jones estimates that 20 percent of overall sales are short sales and foreclosures, which have dragged down housing prices in the area. The median sale price in November 2009 was $249,900, down 7.4 percent from a year earlier, according to the latest data from the Washington Center for Real Estate Research at Washington State University.

Jones is concerned that more foreclosures and short sales could hit the market in 2010. “The U.S. Navy and naval shipping yards make up one-third of employment in the area, so we are dependent on them for business,” he explains. “If the economy does not improve, we will see more people forced into foreclosure. I think that’s what will happen in Kitsap County,” Jones says.

Through November 2009, home sales in Kitsap County totaled 3,320, 14.2 percent higher than the previous year. Silver-dale, however, has seen an average of 10 home sales a month, compared with 20 sales a month at the height of the market in 2006, Jones says. “There are fewer sales, because buyers are not comfortable buying right now because of the risk of losing their jobs.”

Despite the current mood, Jones believes the market will begin to improve in the second half of 2010, with even better years ahead in 2011 and 2012. “The economy will eventually pick up, buyers and sellers will be more confident, and credit will be restored. But it will take time for all this to happen. Things may return to normal in two to four years.”