17 March 2010

Hope for a Spring Housing Rebound in North Carolina

News & Observer

Lynda Franklin of Durham, left, and real estate agent Elaine Bridges sit in the media room of the model home in Cary's Hortons Creek subdivision. Franklin wants a larger house but is wary of taking on a big mortgage

Lynda Franklin has been house-hunting for about six months now, looking for a larger home with a really great mud room.

Franklin knows that interest rates are at historic lows and that prices have come down, but she's still not sure whether she should buy now or wait.

"It's kind of stressful trying to decide on this," said Franklin, who works as an office manager for an advertising company in Durham. "If I stay where I am and I lose my job, I can still be OK. If I get into a $400,000 house, I don't know."

Triangle home sales last year were the worst since 1996. But real estate agents are counting on the traditionally strong spring season to reduce the excess of houses on the market from the boom years and to solidify the recent stronger sales.

A residential real estate recovery will be vital to the Triangle's overall economic recovery, as the industry directly or indirectly supports a long list of businesses, including construction companies, furniture makers, and architecture and engineering firms.

Although the downturn here hasn't been as bad as in most regions of the country, it has put a number of companies out of business and left thousands looking for work.

Buyers such as Franklin will be crucial to any recovery. Franklin is what agents refer to as a "move-up buyer," meaning she owns a home and is considering buying one at a higher price.

Move-up buyers have been in short supply in recent years, largely because buying a new house is often predicated on the ability to sell the house the buyer owns.

This spring could be different, agents say, largely because of a confluence of factors luring buyers off the sidelines: low interest rates, plenty of discounted homes and soon-to-expire federal tax credits for both first-time home buyers and repeat buyers.

"If you have the means to buy - if you have a job and credit and the opportunity to buy - you'll never see an opportunity like this," said Carol McCormick, an agent with Allen Tate Co.

Of course, jobs and credit are two things that have become harder to find in this recession, a fact that continues to weigh down the housing market.

The state's unemployment rate was 11.1 percent in January, the highest since the state began keeping track in 1976.

In addition, backlash against the lax lending laws that led to the housing crisis means that it can be harder to get a mortgage. Potential buyers must have a good credit rating and a sizable down payment.

Foreclosures also may weigh on any recovery in certain areas of the Triangle. Foreclosure filings on Durham, Johnston, Orange and Wake county real estate totaled 1,516 through the first two months of the year, a 72 percent increase over the same period the previous year. Too many foreclosures not only add to the inventory but can also hold down home prices.

Buyers can be choosers

For sellers, the days of being able to sell your home with relatively little effort are over.

"Back in 2005 to 2007, you could have sold your house no matter what in Cary or Raleigh in a short amount of time," said Beth McKinney, who works for a Cary real estate agency.

Now, with so many more buyers than sellers, a house needs to distinguish itself from competitors, and sellers must be flexible in accommodating potential buyers.

"They have got to be staged right," McKinney said. "They have to be priced right. And they have to be available."

When Bill and Jessica Kovash prepared to put their Cary real estate on the market late last year, they knew there was no point in living in the past.

Although their 3,660-square-foot house in the Cotswold subdivision might have sold for as much as $415,000 two years ago, they listed it at $399,999.

"We have to look at what the houses in our development and the surrounding areas are priced at, and we need to price accordingly," Bill Kovash said. "We need to price aggressively but realistically."

The Kovashes also need to sell their house relatively quickly. Jessica Kovash recently took a job in Seattle, and Bill Kovash and the couple's two children hope to join her by summer.

To help improve their chances, the Kovashes followed the advice of their agent, and had their home professionally staged.

A couple from Chicago recently made an offer on the house, but the purchase is contingent on the couple selling their house in Chicago.

"We're going to keep it on the market and look for backup buyers just in case," Bill Kovash said.

Two markets

Among the legacies of the housing bust is a vast discrepancy in sales activity at different price points.

Sales of Triangle homes priced at $250,000 and below have picked up over the last nine months because of the first-time homebuyer tax credit, while sales of higher-priced homes have remained extremely sluggish.

The average sales price for a single-family home in the Triangle in 2009 was $249,568, down 11 percent from the previous year, according to Market Opportunity Research Enterprises, a Rocky Mount firm that tracks real estate and Triangle relocation services.

Sellers such as Kristi and Nathan West are finding that their home is priced just out of the market's sweet spot.

The couple is eager to move from their North Raleigh home off Perry Creek Road to a neighborhood closer to Nathan West's job in Research Triangle Park.

The Wests listed their 2,568-square-foot home last spring for $274,000, which was right at the tax value. After lots of showings but getting no offers, they pulled it off the market, cut the price, and relisted it at $255,000 around Thanksgiving.

"The first showing we had was Valentine's night," Kristi West said. "We're like, 'What's going on?' And we're priced very well."

The Wests bought their house for $257,000 four years ago and are not willing to discount further.

"We would have never guessed we would be selling our house for less than we paid for it," Kristi West said.

Among the challenges for sellers is distinguishing serious buyers from those looking for unrealistic deals.

Triangle has held up

McKinney said people who arrive in the Triangle after selling their home elsewhere at a serious loss often assume they will be able to get a similar discount here.

"Our market isn't like that," she said. "Our market is holding on and is actually stronger than anywhere else in the country."

McCormick said many of the best deals have already been snatched up.

"There is a wonderful opportunity, but a lot of the discounts have been taken," she said.

As for Lynda Franklin, she remains undecided.

She has paid off the mortgage on her house in Durham, and her agent, Elaine Bridges of Re/Max Preferred Associates in Raleigh real estate, has found her ideal house: A 3,500-square-foot model house with a fabulous mud room being offered in the Hortons Creek subdivision in Cary.

It's priced at $434,990.

"I've found the house, but it's really more house than I need," Franklin said. "But if the market comes back, it might be a great investment."

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