By Veronica Chufo, Daily Press, Newport News, Va.
Nov. 2--The residential real estate outlook is a matter of perspective.
Falling prices and high inventory make it a great time to buy, but harder to sell.
"This is probably the best time to buy a house," Old Dominion University economist Vinod Agarwal said. "This is a buyer's market. If you have the resources and you qualify for a home, now's the time to buy because you have a lot of options available to you, and sellers will be eager to help you close the deal."
The up to $8,000 tax credit for first-time home buyers helped fuel a sales growth spurt the last few months, and that'll likely continue this month, Agarwal said.
Whether sales gains continue in November and December is anyone's guess, he said.
But it appears the market has not yet bottomed out, he said.
"Our region is in the process of working through wrenching housing market adjustments that feature falling prices, excessive inventory due at least partially to past overbuilding, relatively low rental rates, relatively high homeowner vacancy rates and longer times between listing and sale," Old Dominion University economic forecasters wrote in the recently released 2009 State of the Region report.
Here's a glimpse at what forecasters said about the local housing market:
Prices In Hampton Roads, prices peaked in the third quarter of 2007, two years later than the rest of the country, and haven't fallen as far. Hampton Roads' median sale price dropped 13 percent since peaking. The U.S. median plunged 25.7 percent.
ODU predicts another 5 percent decline in prices by the end of the year, and more downward price adjustments likely in 2010 due to foreclosures and high inventory levels.
"Ironically, if the housing crisis had been deeper in Hampton Roads, and home prices had fallen more, then the region's chances for a quick rebound would be more favorable," the report said.
"It's not a mystery. Other things held constant, falling prices stimulate sales. When prices don't fall very much (and they have fallen much less in Hampton Roads than nationally) it takes housing markets longer to 'clear,' that is, to attain rough equilibrium between supply and demand," the report said.
Inventory Weighing down the market is an excess of homes for sale. Real estate experts believe there are sellers who want to list homes on the market, but they're waiting for conditions to improve. That'll keep inventory high and push prices lower.
New construction New-home permits in 2009 sank to 1,250 throughout Hampton Roads, the lowest in 30 years.
There's a link between new-home construction and employment. With falling employment and a high inventory of homes, neither a significant increase in new-home construction nor a dramatic improvement in the housing market is predicted for 2010.
Foreclosures Throughout Hampton Roads, residential foreclosures have increased 11-fold, from 973 in 2006 to 10,900 in 2009.
The continuing problem of foreclosures "poses a serious threat to home prices in Hampton Roads and will delay housing price stabilization," the report said.
Vacancy About 14,200 homes were vacant in 2008, about 4,500 units about normal and at a 20-year high. High numbers of vacancies contribute to the perception of a weak, struggling housing market.
Meanwhile, rental vacancy rates are down by 50 percent, compared to 2004-05.
"Many people have chosen to rent rather than to own," the report said, perhaps because stricter lending standards bar them from getting a mortgage.
Affordability The bright spot amid the sluggish sales pace is the affordable-homes market, those selling for $225,000 or less. Those prices haven't fallen as much, and sellers are pitching in by paying for closing costs and upgrades.
In 2003, home ownership was more appealing than renting when the mortgage for a median-priced house was $779, about three-quarters the cost of rent for a three-bedroom house, which was $1,044.
By 2006, the cost of owning a home increased to $1,459, about 25 percent higher than the median rent of $1,164.
Now, the pendulum is swinging back in favor of buying, with the monthly mortgage of $1,171, about 11 percent lower than the median rent of $1,315 in 2009.
That's good news for people looking to buy.
"Regional housing is at its most affordable level in 10 years and is not very far away from its most affordable scenario in the past 30 years," the report said.
"Housing prices have fallen, mortgage rates are modest and regional incomes have been rising, albeit not by a lot. The bottom line? The data tell us this is one of the best times in recent decades to purchase a home."
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