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Home prices rising, for now

August 04, 2012|By ARNOLD S. PLATOU | arnoldp@herald-mail.com
  • Signs on The Terrace show several homes for sale.
By Kevin G. Gilbert/Staff Photographer

The median prices of homes sold here from January through June rose to an average of $143,150, data from Metropolitan Regional Information Systems Inc. shows. That price was 8 percent, or more than $10,000, higher than median prices locally in the same period last year, MRIS data shows.

In June alone, the median price jumped to $166,950, an increase of 19 percent, or nearly $27,000, compared to the median price in June 2011.

The rising prices, lifted in some cases by bidding wars and the fact that sales are coming faster, is sweet news for sellers.

The downside is that the overall number of deals has been dropping. In June, contracts were settled on 118 properties, compared to 134 sold in June 2011, according to MRIS.

Nonetheless, area Realtors are encouraged.

“I’ve been telling clients, ‘In reality, this is the best time to sell your house in four years,’” said Steve Powell, co-owner of Re/Max Achievers, a Realty company in Hagerstown and Frederick, Md.

“I don’t want people to think I’m crazy saying it’s the best time to sell, but for recent years, it is,” Powell said. “There’s the chance of selling it closer to your listing price and you can sell it faster.”

“Definitely, good news. Things are on the way up,” said Dan Plombon, a longtime Realtor and office manager of Mackintosh Realtors Inc. in Hagerstown.

Analyzing changes in median prices is difficult, “but the prices have definitely stabilized, at the very least,” Plombon said. “And you’re starting to see some segments where they’re starting to inch up a little bit. And days on the market are starting to shorten.”

What’s started happening here in recent months also has started breaking the recessionary crust on property sales nationwide, according to the National Association of Realtors.

The median price on sales across the nation of existing homes — including single-family homes, town homes, condominiums and co-ops — was $189,400 in June, NAR said. That’s up 7.9 percent from a year ago, it said.

In general, the median price measures the midpoint in the range of selling prices, so a few high-ticket deals don’t skew the result.

“Despite the frictions related to obtaining mortgages, buyer interest remains solid,” NAR chief economist Lawrence Yun said July 19 in a news release. “But inventory continues to shrink, and that is limiting buying opportunities. This, in turn, is pushing up home prices in many markets.”

“The price improvement also results from fewer distressed homes in the sales mix,” Yun said. That refers to the below-market prices of properties on which the lender had foreclosed or allowed to be sold for less than the homeowner owed.


Ups and downs

As good as the news looks on prices, they still are far short of the county’s peak median price in the heady pre-recessionary days, when wanna-be buyers bid up prices, even paying more for them than the sellers originally asked.

The median price had risen as high as $231,750 by 2006, according to MRIS data.

Sales had slowed, but still were fairly fast by today’s standards.

In 2006, the average sale came 93 days after the property went up for sale, while in the first six months of 2012, the average wait was 130 days.

But compare that to 2005, when the county’s real estate market was at its hottest, by most standards.

The median price that year was $225,000 — $48,000 above 2004’s median. In 2005, properties were selling so fast that it only took 48 days for the average deal to be cinched.

Much of the fuel for all of those sales was the loans that lenders nationwide doled out on easy terms to home buyers. Many people were buying homes, and some were buying more than one property, hoping to flip them for quick profit.

As prices soared, so did inventory.

Looking just at June, which normally opens real estate’s biggest selling season, the numbers of active listings tell this part of the story clearly.

In June 2003, there were 406 homes on the market here. A year later, there were 342. By June 2005, there were 426.

Then, by June 2006, there were 1,161.

By early 2007, as Americans realized the riskiness of the subprime loans and adjustable mortgages many had just received, the nation’s economic fabric began to unravel. Officially, the recession began that December.

Credit tightened, housing values plunged and millions of new homeowners — owing more money than their homes were worth — faced foreclosure and bankruptcy.

In 2007, Washington County’s real estate market shrunk to $291 million — down from its peak of $573 million in 2005 and from 2006’s $415 million.

Nonetheless, the inventory continued to grow, reaching 1,494 by June 2007. The year’s median price held fairly steady, falling just to $220,000.

The median dropped to $195,000 in 2008 and to $167,750 in 2009.

By June 2009, the number of houses on the market had dwindled to 1,134. That was down to 1,093 by June 2010.

By June 2011, it was at 926.

By last month, it had sunk to 681.


Fewer foreclosures

A basic economic tenet is when the supply of anything goes down, the price goes up.

That’s true with real estate now, but there’s another big factor at work.

Fewer foreclosure properties are on the market here this year, as lenders nationwide respond to criticism that they weren’t doing enough to help borrowers work off their debts and stay in their homes, local Realtors said.

“Up until about six months ago, about 30 percent of the local inventory consisted of foreclosures and short sales,” Powell said. “What happened was, the banks stopped doing (many of) the foreclosures, started improving the short sale process.”

He said there are just 27 active foreclosure properties on the market countywide right now.

That shift has eased the pressure on “Joe Homeowner down the street” to cut his listing price to stay competitive with the below-market prices lenders have on distressed properties, Plombon said.

As a result, Plombon said, prices have “more or less leveled off” on most kinds of property.

“Higher-price ranges (of properties) are still a little bit more challenged, so to speak, but they’re improving,” he said.

At “the lower end of the market, first-time home buyers are more prevalent right now. And the good news is, we’re seeing more of the move-up folks getting back into the market,” Plombon said.

With the supply tightening, there are even bidding wars again.

“We’ve had multiple offer situations now,” Powell said. “Of the last 150 transactions (at Re/Max’s Hagerstown office), approximately 20 of those agents were in multiple bid situations.”

“Over the last several years, that was rare,” Plombon said. “Whereas now, it’s not widespread, but it does exist.”


Shadow inventory

As good as things sound pricewise, there still is a large unknown hanging over the market, Realtors said.

“It’s called the shadow inventory. We don’t know when it’s going to come out,” said Betty Hays, president-elect of the Pen-Mar Regional Association of Realtors. Based in Hagerstown, it represents several hundred Realtors and affiliate members in the area.

About three months ago, Powell said, an attorney for the Maryland Association of Realtors told a gathering here that there are about 51,000 residential properties on the market in the state. The attorney told them lenders still have “almost 50,000” foreclosure properties in Maryland that they haven’t yet put on the market, Powell said.

So if lenders decide to sell those foreclosure properties now, “it would just saturate the market again” and drop prices, Powell said.

Hays said she doesn’t know what will happen, but she’s optimistic.

“There’s so much hardship out there right now. People have lost jobs. They couldn’t refinance their mortgages,” she said. “I’m always hopeful. Perhaps we’ve bottomed out. I don’t know. I don’t have the glass ball.”

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