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Sunday, July 16, 2006
By NATE PARDUE
Staff Writer
A stagnant housing market may be bad news for sellers and investors, but not for buyers who are willing to shop around.
More homes on the market and prices that are at least slowing, if not holding steady or dropping, means buyers have more to pick from.
"My advice is shop. Shop 'til you drop," said Russ Thibeault, president of Applied Economic Research in Laconia.
T
hibeault said the data from this summer compared to last shows that New Hampshire home prices have leveled off, but haven't decreased.
Meanwhile, the number of houses on the market has increased almost 50 percent from last year.
There were 15,782 homes listed for sale in New Hampshire in July, compared to the 10,811 homes listed in July 2005, according to figures from the Northern New England Real Estate Network.
Thibeault said during this time last year, the available housing inventory, or the time it takes to sell all the homes at the pace of sales over the past year, was a six-month supply.
Today's available housing inventory is about a nine-month supply, he said. Home prices typically begin to drop when the inventory reaches a 12-month supply.
The trend is good for buyers, Thibeault said, because they can be more selective when choosing a home.
"From a buyer's perspective, you're more likely to find a house that fits your needs. Better quality, location, maybe price, just because there is more out there," Thibeault said.
Thibeault said his advice to buyers is to take their time looking for the right home because there are groups of homeowners out there who need to sell soon, although it takes some work to find them.
He suggested working with a broker who can pinpoint exactly how long certain homes have been on the market.
"You can start you search by saying: "I'm looking to buy a house from someone anxious to sell," Thibeault said.
Median housing prices in New Hampshire continue to rise, but at a slower rate than in recent years, based on information from the real estate network
The median price for a home in May 2006 — the most recent month figures were available — rose 1.7 percent from the previous May, from $244,900 to $249,000.
The median price in May 2005 rose 5.1 percent since May 2004, when the median was $233,000.
In Maine, the median price of a home in May 2006 rose to $196,950, a 2.58 percent increase from a year ago, according to the Maine Real Estate Information System.
Price trends for new homes nationally have remained steady from this time last year.
The median price for a new home was $232,500 during the first quarter of 2005, according to the U.S. Department of Housing and Urban Development's Office of Policy Development and Research. The median price was the same in the first quarter of 2006.
Median prices for existing homes rose from $199,700 to $218,700 over the same two quarters, a 10 percent increase.
But the pace of sales slid, leading to the higher inventories.
Overall, new single-family home sales fell 7 percent in the first quarter of 2006 compared to the first quarter of 2005, while existing home sales fell 2 percent, according to HUD.
Unless homeowners are pressured to sell because they are taking a new job or can't afford the mortgage, for example, there's little other reason for panic because home prices aren't rising or falling much, so houses are staying on the market longer, Thibeault said.
"It's to the point where people are no longer selling for a windfall amount, but prices aren't falling to where they're saying 'I'd better get out,'" Thibeault said.
The average rate for a 30-year fixed-rate mortgage was 6.74 percent as of July 13, according to Freddie Mac, a government-sponsored mortgage financier. The same mortgage had a 6.1 percent interest rate in January, the lowest of the year so far.
Ralph Pope, of Coldwell Banker in Dover, said rising interest rates have left more homes on the market because "it takes people on the lower end of the affordability scale" out of the home-buying picture.
Investors also have stopped snatching up properties in big numbers because of reduced appreciation, which only has added to the inventory, Pope said.
Thibeault said people should forget about buying now if they plan on selling at a greater price within the next year or two, a practice known as "flipping."
The future pattern of pricing shifts are too unpredictable for short-term investments, and mortgage rates are likely to go higher, making "flipping" a bad idea at this point, Thibeault said.
"You missed that train. You missed that train two years ago," Thibeault said.
Pope categorized the changes in the housing market as "an adjustment," more so than an indication that greater economic troubles are looming.
"It's a normalization of the market. It leads to higher inventories, which means prices have to come down, and that's what they're doing," Pope said.
The changes haven't been easy on all homeowners.
Higher interest rates and an oversaturated housing inventory are to blame for a spike in the number of foreclosures in New Hampshire, according to one company.
ForeclosuresNH is a for-profit business that acts as an intermediary between investors seeking to buy foreclosed homes and sellers whose homes are being foreclosed. The firm also tracks the state's foreclosure filings.
There were 296 foreclosure notices filed in June, a 37 percent increase over filings in May.
"Normally, these homeowners would be able to sell or refinance their home to avoid foreclosure, but with a soft real estate market and interest rates at the highest level in four years, they are finding themselves with very few options," said James Kenney, president of ForeclosuresNH.
Like Pope, Barbara Patterson, of Century 21 in South Berwick, Maine, said the pattern is a result of a return to normal after a "strong, crazy, wild, out-of-control market."
She said it was difficult to say why price increases started to slow after such a long upswing.
"That's like saying: 'Why did the stock market go up?' It just got to the point where it became unaffordable. Buyers just said 'no more,'" said Patterson, who has more than 30 years of experience in area real estate.
She predicted this year likely will be viewed as a "pause" in the market while prices readjust, then return to the normal pace of 3 to 4 percent appreciation per year.
Many sellers — and even a few realtors — have been slow to catch on to the trend, posting homes for sale at prices "in the mindset of a year and a half ago," Patterson said.
The result is homes stay on the market longer than they used to, meaning buyers have more selection instead of starting bidding wars with other buyers at outrageous prices.
Another likely factor is that real estate agents new to the business may be using outdated figures when doing a market analysis, which agents use to determine what a seller should charge for their home. A market analysis uses "comparable sales stats" from previous months.
"If the agent comes in and uses sales figures from last year, you have a problem, because that's not comparable," said Patterson, adding that more accurate comparisons are from two and three months ago.
Pope said buyers seeking homes in the longer term shouldn't wait so long for prices to go down that they miss out on a moderate deal in search of better one.
"The best advice is: Don't wait for the bargain-basement super deal. You will miss out because mortgage rates will put prices out of your reach, or prices will turn. You're not going to find a $400,000 home for $100,000," Pope said.
