Geist Realtor Analyzes Local Housing Market

Reading the national headlines regarding real estate is enough to make one want to bury their head under the blanket and wait this market out.  However, the national headlines do not accurately depict what’s happening in our local market.

“While we have never seen the great appreciation that housing prices in Florida and California saw, we’re also not seeing anywhere near to the declines the rest of the country is seeing right now,” states Rachel Quade, a real estate agent with F.C. Tucker’s Geist office.

Nationally, real estate prices have dropped about 12 percent from their peak in 2006.  Quade used MIBOR sales data to determine how Fall Creek, Delaware and Lawrence townships fared in 2008.  “I wanted to use actual numbers to truly see where the local market stands. What I found is that perception does not equal reality. Everybody assumes that every price range has taken a huge hit over the past two years in regards of pricing, and the actual numbers just don’t bear that belief out,” said Quade.

Quade, a marketing major with an M.B.A., reviewed the historical data of every individual home sold in Fall Creek, Delaware and Lawrence townships in the past three to six months. Homes that had been bought and resold since 2006 were used to determine whether homes in the area were appreciating or depreciating.  Distressed sales, which include short sales and foreclosures, were not included in the analysis.

“While distressed housing on the market obviously puts downward pressure on the prices of other homes in the area, they aren’t used in determining a typical home’s worth,” said Quade. “It’s impossible to determine how much an investor may have put into a home after they bought it. An investor might buy a foreclosed home for $150,000 and be able to sell it six months later for $200,000- but without knowing how much the investor spent on home improvements, you can’t accurately determine how much that home truly appreciated.”

After analyzing the data that was gathered from MIBOR, it was determined that homes under $300,000 have seen less than 1 percent depreciation in Fall Creek and Delaware townships – far below the national average. While the same priced homes in Lawrence Township did have slightly more depreciation, their depreciation was still below the national averages.

While home prices in this price range have remained relatively stable, the number of homes sold in this price range has declined in the past year.  The decline is likely a result of a tightening in available financing, concerns among buyers regarding job security and negative national media reports surrounding the real estate market.

One factor that might help the under $300,000 price segment see an improvement in 2009 is reduced inventory. Months of inventory is based on how many months it would take to sell all of the homes currently on the market based on last year’s monthly sales’ averages. According to NAR (National Association of Realtors), a 5.5-month supply is considered balanced by historical standards. Locally for homes under $200,000, there is currently only a 5-month supply of inventory. The lower the inventory, the higher a home’s sale price should be.

While more modest priced homes have seen relatively stable prices over the past two years, homes in the $1 million plus range have seen greater declines in their values. Although there were no homes in this price range that have been bought and resold in the past two years in the Geist area, one can compare similar homes that were sold in 2006 to ones sold in 2008 to estimate what the depreciation has been.

“Homes on the water or golf course that were selling for around $1.2 million two years ago are now selling for around $1 million or less,” stated Quade.

A high inventory in this price range is also a concern for sellers. Currently there are 33 homes on the market for over $1 million in Fall Creek and Delaware townships. Last year, 10 homes in this price range sold.  Fifteen homes priced at $1 million or more are currently on the market in Lawrence Township. Based on last year’s sales, it would take about three years to sell of all of those homes- that’s also assuming no other homes came on the market.

“When you’re talking about expensive homes, this is definitely a buyer’s market. While a seller may not get as much money for their home as they were hoping, they should more than make up for that loss on the savings they will gain on the home they are buying if it is a more expensive home,” said Quade. “When you consider the historically low interest rates coupled with the depreciating home prices, you’re seeing unprecedented buying opportunities in this market.”

Many homebuyers believe that financing is unavailable. Again perception is different than reality. While lenders have tightened their qualifications, buyers with a 680 credit score who are able to put at least 5% down for conventional mortgages are still able to get financing.

Historically low interest rates are also an incentive for buyers today. The Federal Reserve cut interest rates nine times in 2008, leaving rates at record lows heading into 2009. Thirty-year fixed mortgage rates bounced between 5 and 6 percent in December.

“Even though there really are some positive signs out there for a better 2009, sellers need to do everything they can to improve their chances of selling their home,” stated Quade.  She suggested that sellers need to work with their agents to price their homes realistically, and that sellers need to get their home in perfect condition. The “lived-in” look is not going to sell for any price, even close to what a seller wants. She also recommends checking out local competition to see if your home is priced accurately.