|
Credit crunch delays housing market upswing
By Kathleen Dayton
Staff Writer
When analysts began looking at the housing market at the first of the year, they saw a downturn they expected to correct by the year’s end. What they didn’t anticipate was the credit crunch.
“Most everyone was expecting housing to decline at least through the middle of 2007,” said Adam York, an economic analyst with Wachovia Bank. “We had started to see the tentative signs of a bottom in the summer, but with the meltdown in the credit markets, housing has been sent on another leg downward.”
Before lending was tightened, a flattening of the housing market had been expected, York said.
“The credit market trouble added a significant variable,” he said. “Now we think we’ll probably see some sort of a bottom in the first half to the middle of 2008, then a slow rebound from there and we’re not going to see a really strong housing market in 2008 by any means. We think that prices will probably decline year-over-year in 2008. We’re looking for positive but extremely small growth in prices in 2009.”
Wachovia tracks national trends and looks at the national picture. Locally, some real estate industry experts are somewhat more optimistic.
“Overall, I think the worst is behind us,” said Lauree Bradway, broker-in-charge at Lauree Bradway Realty in Summerville and a member of the board of the Charleston Trident Association of Realtors.
Bradway predicts things will pick up in the spring and that by this time next year the market will be fairly strong.
“It won’t be like it was when we were getting multiple offers for houses selling in two days, but I think it will be strong again,” Bradway said. “Another good thing that has happened is prices have balanced out. They’ve not dropped dramatically, but there’s a balancing act that has taken place in the market, which is not a bad thing.”
Like many who know the Lowcountry real estate market, Bradway said the area is in much better shape than some other places.
“I tell people often that it’s a good thing we live in South Carolina, not South Dakota,” Bradway said. “We’ve got a lot of factors in the Lowcountry region that keep our market strong. There are developers who have invested a lot of money here, like Del Webb, that are banking on it and doing well. I think the key for what our market is going to be is strong and steady. I’ll take that over a booming market any day because it’s consistent.”
Philip Ford, executive vice president of the Charleston Trident Home Builders Association, said the Charleston market may turn around a little bit ahead of the national prediction, but that won’t be soon.
“Everything that we’ve heard from—the National Association of Home Builders and the national economists—predict things not really turning around until 2009,” Ford said. “Maybe if we’re ahead of the national prediction, we’ll be looking at mid-2008 or the end of the last quarter. I think there are some signs we’re picking up a little bit. From a full recovery across the nation, everyone is saying 2009.”
South Carolina Realtors’ market data for the third quarter of 2007 shows home inventories at 10% above the same time last year, although average prices are holding steady and even growing in some areas, including Rock Hill and Hilton Head.
Total sales from January through September this year declined 8.8% to 48,967. Even so, 2007 is on track to be the fifth-highest year on record for existing home sales, said the organization’s CEO, Nick Kremydas.
Tighter lending standards and reduced availability of credit will complicate, but not derail, a national recovery in the housing market, the National Association of Home Builders announced in October.
“The consequences of aggressive marketing of exotic mortgages—especially sub-prime ARMs—during the housing boom came back to roil credit markets over the summer,” said David Selders, the home builders association’s chief economist. “With many of these mortgages scheduled to reset to higher rates in the remainder of 2007 and through 2008, additional weakness in housing markets is likely.”
The association in October also reported further erosion in builder confidence for new single-family homes.
“Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,” association President Brian Catalde said.
Bryan Crabtree, president of Weichert Realtors-Dean Kelby and host of the radio program “Lowcountry Real Estate,” said buyers today can get a great deal, but there is a real fear of buying in the market.
“People are telling us they want to wait and see how low it goes,” Crabtree said. “You’re going to know that when it’s over. If there are sellers selling at a bargain, take it, and if you don’t need to sell right now, don’t.”
Crabtree said the current market isn’t fun for sellers and might get a little worse.
“On the other hand, a buyer can get a great deal,” Crabtree said. “I do think the million-dollar question is: What part of 2008 is it going to start to turn around? If you asked me two weeks ago, I might say mid-2008. Now I might say end of 2008. Once the North starts selling just a little better, we’ll sell a lot better. We have come into the bad part of the market behind most of the nation.”
Jeff Meyer, president of KB Home South Carolina, said he thinks housing market activity depends on what happens with inventory.
“I think many of the builders out there are trying to reduce their inventory levels,” Meyer said. “I think we’re seeing that in certain price points, there’s a reduction, and in some price points, there’s still a big overhang in inventory. I think pretty soon prospective home buyers are going to look around and there’s not going to be as many new houses to buy.”
But Brad Rundbaken, an agent with Sandlapper Real Estate and principal with California-based Diversified Resource Group, a real estate development and financing company, said there was almost twice as much inventory in the Charleston area this September compared with September 2006.
“You couple that with numbers that were already trending down and the lending problems we’ve got now, and there’s not a whole lot to get excited about in Charleston,” said Rundbaken, who also publishes the Web site Charlestonmarketreport.com.
Few people are adjusting the prices of their homes to weaker market conditions, Rundbaken said.
“If someone buys a stock and it goes down 10 percent, 20 percent, they can’t get out quick enough,” Rundbaken said. “But if they bought a house for $200,000 and their real estate agent sells it for $190,000 to get it off the market, a lot of sellers can’t accept that.”
Supply and demand will continue to determine the market, he said.
“If people search hard enough right now, in certain sub-markets of Charleston there are still certain deals to be made out there,” Rundbaken said. “If you step back and take a macro view of Charleston, the trends are still down, and I would say it’s maybe 18 months before it gets better. That’s just a prediction. I don’t have a crystal ball.”
Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@setcommedia.com.
|
E-Mail This Article
Printer-Friendly Version