Realtors, appraisers predict 2009 housing market rebound

While homeowners across the country worry about their home value’s appreciation, realtor Aaron Rose has watched the value of a homebuyer skyrocket in Columbia.

“A buyer is a valuable thing right now,” Rose said. “It’s amazing how a buyer with no contingencies has the upper hand.”

Those in the real estate business agree it’s a buyer’s market. First quarter sales in 2009 are down 22 percent from the same period in 2008. As of April 28, 398 homes had sold and 1,280 were listed for sale. Buyers who realize the houses’ worth have a good chance of landing a bargain, reversing the dynamic from a few years ago, Rose said.

“Back then, if you lowballed, it was an insult to the seller,” he said. “Now, it’s par for the course.”

Realtors have their work cut out for them moving homes in this market, and the sales data show it. The number of realtors has decreased as well, from around 630 when the market was hot to around 540 now, said Columbia Board of Realtors CEO Carol Van Gorp. As banks keep lending standards tight and consumer confidence remains low, buyers are a scarce commodity. But buyers remain in the Columbia market and are forcing concessions out of sellers.

Despite that, Columbia home prices remain unusually stable. Columbia was ranked 29th out of almost 300 Metropolitan Statistical Areas in annual home-value appreciation in the Federal Housing Finance Agency’s 2008 year-end report. At 2.11 percent, Columbia is by far the top market in Missouri. And this year, median home-sale prices tracked by the Columbia Board of Realtor’s MLS have increased in the first quarter from the same period last year.

But new home construction remains low. The city issued 16 single-family detached-home construction permits in the first half of April, compared with 47 for the entire month of April in 2008 and again in 2007. In March 2009, there were 22 permits issued, compared with 24 in March 2008 and 60 during that month in 2007. While that building stump has decreased inventory, it’s squeezing more builders out of the market and does nothing to reduce the remaining oversupply of developed lots. Affordable housing development is difficult now, according to those in the market, yet lower-priced homes are driving the market today.

The most active segment of the market is the price range between $125,000 and $160,000, according to Randall Bryson, SRA, of Associated Property Analysts Inc., who’s worked as an appraiser in Columbia and Boone County since 1980. The first-time homebuyer credit and low interest rates have helped to jump-start the market this spring, he said.

“If we hadn’t had low interest rates and the home buyer credit, then yes, the numbers would be down,” Bryson said.

More expensive homes are taking much longer to sell, said Bob Lawler of RH Lawler Appraisals. The inventory of houses under $150,000, though, is being reduced substantially, he said, most likely because many of those buyers do not need to sell a house.

That price-range has always driven the market, said Betty Pauley of Assist 2 Sell Buyers and Sellers Realty.

“If you list something that’s clean and neat and doesn’t have bark on the windows, it’ll sell in six weeks,” she said. “It’s always been like that.”

The difference now is the lower volume and the effort it takes to make transactions.

“We realtors are working five times as hard to make one-fifth the sales,” Pauley said.

Although the average time a house spends on the market hasn’t changed much from two years ago, sellers really have to spruce up the house to attract the few buyers out there.

“During the peak, it was a seller’s market,” Bryson said. “The ugliest house on the worst lot would sell just as fast as the perfect house on the best lot. That’s not true today.”

Buyers are pickier now because they can be, Rose said. Just a few years ago, it was a true sellers market, in which buyers had to choose from less than half the number of houses they do today. Now, they can look at 40 to 50, he said, giving them the freedom to make low offers to feel out the sellers. If the seller laughs at the offer, “then they bring out the real money,” Rose said.

Jason Thornhill of Weichert Realtors said that when the market was moving faster, a buyer would have been crazy to make a lot of inspection report requests for fear of the seller just moving on to another buyer. Recently, he’s seen more requests on inspection reports and sellers throwing in personal property such as big-screen TVs and lawn mowers to sweeten the deal.

“When the market was really moving, the only thing that was negotiable was the price,” Thornhill said. “Now, everything is negotiable.”

Van Gorp said homes are still selling around 97 percent of the listed price. But Rose said he’s seen a couple instances where people got aggressive on prices to sell the house and hurt the appraised value of other similar homes on the market. With the lower sales volume right now, a low selling price has more affect on the appraised value of similar homes.

“There are some subdivisions that are just dying, dying and everybody knows it,” Rose said.

Pauley said buyers aren’t biting unless it’s a bargain.

“People are still expecting prices to decline,” she said. “No one wants to catch a falling knife, and as long as they think they’re still falling, they aren’t going to buy at retail price.”

Still, prices are stable with a slight appreciation overall, and realtors are optimistic about the spring season, when the majority of Columbia home sales usually occur.

Van Gorp said she believes that, in terms of sales volume, the market bottomed out in January. She pointed out that the number of sales increased significantly in February, which saw a 73 percent increase in sales from the month before.

“I’ll be feeling better when we’ve surpassed last year and we make a steady increase,” she said. “I can see we’re closing within a few homes of last year, but when we start surpassing it, I’ll be happy.”

Thornhill sees some pent-up demand in the market. There are people who are qualified and able to buy, he said, but holding off because they are worried. The market just needs a little bit of hope to get kick-started. Overall, he expects sales to pick up from 2008.

“We’re not as busy as we were three years ago,” he said. “But we’re certainly better off than we were last year.”

The big obstacles to a rebound are consumer confidence and tightened lending standards.

“I talked to one agent yesterday who said she had sold the same home three times,” Van Gorp said. It took three tries to find a buyer whose financing plan didn’t fall through.

Pauley said she is seeing fewer clients qualify for a mortgage.

“I’ve had very good borrowers who would not have had any trouble getting a loan years ago now having trouble,” she said.

Banks have seen a windfall in refinancing activity, but new mortgage loans are lagging. The Wall Street Journal reported earlier this month in an analysis of 21 of the nation’s largest banks that, excluding mortgage refinancing, consumer lending had fallen by a third between October and February.

BCNB marketing director Mary Wilkerson said the bank has already seen as much refinancing volume this year as all of last year due to low interest rates. New mortgages have been lower in volume, but she said the bank hopes activity will pick up during the traditional spring buying season.

Lawler pointed out that appraisers are now required to do a market analysis for every appraisal they conduct for a mortgage backed by Fannie Mae or Freddie Mac. If the analysis shows a declining market, lenders may require more collateral for a home loan, he said.

Van Gorp said local lenders are dominant in the Columbia market; therefore the local housing market should face fewer hurdles on the way to recovery than other communities.

“We are fortunate in Columbia that the bulk of our lending has been through our local institutions, and like it or not, they’ve been very conservative,” she said.

New home loans in Columbia are unlikely to be constrained by depreciating home values. Over the past five years, the Columbia home market has appreciated by 22 percent, according to the FHFA, and most people in the market see prices remaining static if not increasing slightly.

Whereas states hit hard by the housing slump saw depreciating value, the Columbia market has only seen a lack of activity, Bryson said.

“From what we can tell, through the end of last year, used homes generally under $300,000 were pretty much static for the year in value,” he said. “As the price-range goes up, the market became softer, softer more from the standpoint of lack of activity than prices.”

The typical annual appreciation in Columbia has traditionally been between 3 and 5 percent, Bryson said. It hasn’t been that high lately, but Bryson pointed out a slight increase in median sale price. Columbia saw “solid increases” in home prices during the peak years in the middle of the decade, he said, but nothing was too overpriced, meaning nothing is too deflated now.

Despite the remaining uncertainty about how much the housing market could improve in 2009 and how well it will perform in the spring, one thing is certain: it’s not a bad time to buy a home.

“It’s a great time to buy a house,” Rose said. “We’re in a market as hot as hell.”