High Country Real Estate: Slower Sales, Increased Value Since 2007

Story by Kathleen McFadden

Data from the Avery-Watauga Association of Realtors shows that home values have increased over last year, but sales are down 22 percent and inventory is up 12.7 percent. “The economic slowdown is affecting everyone and real estate is no different,” said Chris Coley, president of the Avery-Watauga Association of Realtors.

Some of the current indicators of that economic slowdown are inflation, housing starts and foreclosure filings, and even though the High Country has not experienced the plummeting property values and the mortgage crisis that has devastated markets in Florida, California, Arizona and Nevada, High Country residents are dealing with inflation, tightening credit markets and decreased home sales.

Nationwide, the economic picture is far from reassuring. The U.S. Department of Labor released a report last week showing that consumer prices increased by 0.8 percent in July. Inflation is rising at the fastest pace since 1991.

This week, the Department of Labor wholesale report showed wholesale prices jumping 1.2 percent in July, more than twice the 0.5 percent gain economics expected, the AP reported.

On top of that, the Commerce Department reported that housing construction fell in July to the lowest pace in more than 17 years—the weakest showing since March 1991—as the housing industry continues to struggle with falling sales and rising mortgage foreclosures.

RealtyTrac®, an online marketplace for foreclosure properties, released its July 2008 U.S. Foreclosure Market Report™ on August 14, showing that foreclosure filings—default notices, auction sale notices and bank repossessions—were reported on 272,171 U.S. properties during the month, an 8 percent increase from the previous month and a 55 percent increase from July 2007. The report also shows one in every 464 U.S. households received a foreclosure filing during the month.

In North Carolina, RealtyTrac’s July report showed a total of 4,303 foreclosure filings, a percentage increase from June 2008 of 24.18 and a percentage increase from July 2007 of 126.59. North Carolina is ranked 25th overall in the nationwide foreclosure listing.

Closer to home, the report identified Watauga County as having 7 foreclosure properties and Avery County having 4.

Recently announced in the legal notices is the foreclosure of a property in Laurelmor, the Ginn Company development in Watauga County.

And the Ginn Company is having its own difficulties, currently in default on a Credit Suisse-led first- and second-lien debt of $675 million for Quail West in Naples, Fla., Tesoro Preserve in Port St. Lucie, Fla., Ginn sur Mer in the Bahamas and Laurelmor. In a statement issued August 1, Ginn president Robert Gidel stated, “Although negotiations with the lending group have been ongoing and are continuing, our agreement (30-day forbearance) did expire yesterday. Negotiations for a resolution are continuing and at this time we remain optimistic that this credit facility will be restructured in a manner beneficial to all parties.”
So what does all this mean to the local real estate market?

Numbers provided by the Avery-Watauga Association of Realtors for the January to June time period show that inventory—the number of homes on the market—is up 12.7 percent, sales are down 22 percent and average days on market are up 9.2 percent compared to the same period in 2007.

Along with the overall impact of inflation and affluent buyers’ caution in presidential election years—“this is more a ‘want-to’ rather than a ‘need-to’ market,” Coley said—one of the most significant causes for the slowdown is access to mortgage money.

“The financing industry is impacting real estate,” Coley said. “It’s tough to get money from the bank. It’s a very real thing. A mortgage is not a slam-dunk any more. It’s a problem more this year than ever before. One hundred and ten percent loans are not happening much here, but when national lenders pull the reins in, it affects everything.”

The slowdown doesn’t just impact real estate agents, Coley said, but also home inspectors, real estate magazines, appraisers, builders, support staff and many others. “The economic impact [of real estate] is enormous,” he said. “I would like to see a study of the economic impact on the area.”

Despite the slowdown in sales and the increased time on the market, the good news is that home values are up over last year. The median sales price has increased 6.7 percent, from $229,500 last year to $245,000 in 2008. Median is a mathematical result that indicates that one half of the group is higher and one half lower. The median price of 101 sold homes would be the price that is lower than 50 of the prices and higher than 50 of them.

That slow, incremental increase in value plays well with Coley. “Real estate by nature is a slow-moving cycle. You’re not supposed to be able to trade in and out over morning coffee. In Florida, you may as well have been a stock trader. My father told me, ‘You don’t have to be smart, you don’t have to be pretty to make money in real estate; you just have to be patient.”

Only 20 percent of active listings in the Avery-Watauga Multiple Listing Service are for homes priced under $20,000. Most properties in the High Country sell for much more, with the $400,000 to $1 million category having the largest number of homes. While property owners can breathe easier about their homes maintaining their values, the sales median price is not good news for many would-be homebuyers who cannot qualify for mortgages in the $200,000 range. Current listings show that the majority of homes available for sale in Watauga, Avery and surrounding counties that are listed in the Avery-Watauga Multiple Listing System are priced above $200,000. In fact, the asking price for 80 percent of the listings ranges from $200,000 to more than $1 million, with 20 percent priced under $200,000. Properties at the lower price point can range from tiny in-town structures that offer convenience and proximity to businesses and services to larger rural homes that offer square footage, land and other amenities in exchange for a commute.
However, new federal legislation may help first-time homebuyers, including those in the High Country. The Housing and Economic Recovery Act of 2008, recently signed by President Bush, includes several financial provisions designed to help people purchase their own homes. The legislation—
• Creates a refundable tax credit for first-time homebuyers that works like an interest-free loan of up to $7,500 to be paid back over 15 years
• Provides couples using the standard deduction with up to an additional $1,000 deduction for property taxes and $500 for individuals
• Gives states $11 billion of additional tax-exempt bond authority in 2008 that they can use to refinance subprime loans, make loans to first-time homebuyers and finance the building of affordable rental housing

“If someone has good credit or a FHA loan, it’s a great time to buy,” said Coley. “There’s a large selection of homes on the market. In addition, interest rates are still low, which is helpful for people purchasing real estate.”

The National Association of Home Builders has just launched website, www.federalhousingtaxcredit.com, that contains information on how the tax credit works, including eligibility requirements. The credit expires on June 30, 2009.

To keep tabs on the local real estate market, the Avery-Watauga Association of Realtors will provide monthly updates on housing sales, listings, median price and days on the market.

“I’m not a fan of the rosy ads,” Coley said. “The best way out of a situation is to establish and acknowledge the situation.”

The Avery-Watauga Association of Realtors is composed of more than 700 members in Watauga and Avery counties and the surrounding area who maintain a marketplace where buyers and sellers can safely transfer property under the guidance of a professional held to standards of excellence. More information is available at www.awaronline.org.