By Amelia Veneziano
The national news says the sky is falling. Home foreclosures, plummeting property values and moving vans are at the top of the broadcast. But Chicken Little can keep his hat on.
“Right now, where the Tri-Cities is affected is that consumers are hearing and reading that there’s no good news.” said Jeffrey Losey, executive director of the Home Builders Association of the Tri-Cities. “People are buying into that, although employment here is holding fairly steady and our market is still doing well.”
Nationally, building of new, single-family homes is off 47 percent for all of 2008. In the Tri-Cities, it’s dropped only 21 percent, said Losey. “Obviously we pale in comparison to the rest of the country,” he said.
November showed a significant decrease in the number of homes sold in the Tri-Cities, according to the Tri-Cities Association of Realtors. In November, 132 homes were sold, with another 83 pending sale, compared to 267 sold and 144 pending during the same time period in 2007. Sales decreased by more than 50 percent. “November was kind of a shock,” said Bill Prussing, president of the Tri-City Association of Realtors. “That was a big move down.”
December improved slightly, to 91 homes were under contract, compared to 107 in the previous year, a drop of almost 15 percent. “We had a ton of bad news in November. There was presidential election, which creates a lot of uncertainty. There was one financial disaster after another. The stock market was on a roller coaster…..I think people were afraid. You don’t make major decisions when you’re afraid,” he said.
House sales decreased 27 percent in the Tri-Cities in 2008. A total of 2,694 homes were sold in 2008. In 2007, 3,695 were sold for the year. In comparison to the rest of the state, the stable number of homes available, even with fewer units closing, means that values are steady, said Prussing.
“Our market hasn’t rocketed up and down (in value), he said. “We’ve been very steady….We’ve been slow, steady growth without a lot of variation.” The median home price in the Tri-Cities in 2008 was $166,000, compared to $167,000 the previous year – a drop of less than one percent. And 2008 prices were still higher than in 2006, when the median price was $160,900.
Washington’s median home price fell 10.4 percent during the third quarter to $281,500. Even though the Tri-Cities market has held solid, it’s affected by turmoil in other regions, local real estate professionals said.
The factor having the greatest impact on real estate business is the ability of people to sell homes in other parts of the country before coming to the Tri-Cities, and since they can’t sell that home, they’re not buying here. With that logjam in effect, employers who want to bring new people in are having to wait until they can sell their homes elsewhere. Much of that jam is caused by foreclosures in other parts of the country, which saturate the market with homes sold under value. The Tri-Cities has not been heavily hit by the trend, but the impact is is widespread.
“That makes it harder for the guy who’s paying his mortgage and has a reasonable asking price to sell his house,” Prussing said. Lending policies and a rush to satisfy the ‘American Dream’ of homeownership have allowed zero-down and flexible interest rate plans. But with the current crises, old policies are coming back. “You used to have to put down a sizable down payment before you were able to get a loan,” Prussing said, “We’ve gotten away from all that. We’re now moving back toward (significant down payments).”
Since the Tri-Cities has seen relatively few foreclosures compared to much of the nation, the main impact of that problem has been delaying many people from moving here. People without homes to unload – that lucky group of first-time buyers – will have a golden opportunity. Interest rates have been steadily dropping and were at 4.5 percent in December, as low as they’ve been 30 years. A first-time buyer tax credit of $7,500 is a congressional incentive to go out and buy.
“That’s tremendous,” Prussing said of the rebate. “That’s available for people to take advantage of.” The home must be purchased by July 2009 for that tax credit, but there are indications that a similar credit will materialize for 2010. First-time buyers aren’t the only ones who will find a deal, although they are the only ones who can receive that tax credit. Interest rates apply to all buyers.
In 2008, all home markets were a buyers market; the closest things to a sellers market were homes in the $175,000 to $199,000 range. Even though this is a buyers market, sellers can still benefit. Waiting to sell a house could bring a modest gain in the value, but most sellers will turn around and buy a new home — which has also increased in value, Prussing said. There’s no big savings in that. When prices are down, the buying is better. “Even though they might sell low in this market, they can turn around and buy low,” he said.
It’s still a challenge for homeowners to stomach a huge loss in property values. “It’s pretty devastating if your home is the largest single purchase you ever make and it loses 20, 30, 40 percent of its value over a year,” Losey said. “Most people can’t eat that kind of loss.” Some owners are opting to hold on to their current homes, but still spend a little money in our market.
“We’re seeing a lot more remodels.” Losey said. “People are opting to remodel a kitchen or add a bathroom, rather than buy a new house.” Central air conditioning units, sheds, pools and other additions have been popular items in 2008, he said.
Building is also down. According to the Benton-Franklin Title Company, single-family building permits dropped 31 percent in Benton and Franklin counties since 2007 when 1,594 new single-family home permits were issued. In 2008, 1,235 were issued by through the first two weeks of December. Building permits peaked in 2004, when 2,391 new home permits were issued for the year.
Some buyers are just waiting to see what happens. “A lot of people have been delaying buying houses with all this bad news.” Prussing said. “They’re looking at their 401(k)’s, which have dropped maybe 40 percent. That puts fear into people. They’ve still got to buy groceries, heat, gas, utilities – they’re putting the big-ticket items off until next year. They want to see if they’re employed first.”
With unemployment rates holding steady, the Tri-Cities should hold on. “As long as the employment picture in the Tri-Cities stays positive, with interest rates low and no other major disasters, I think people will take advantage of the low rates, provided they’ve got a decent job and good credit,” said Prussing.
In a recent HBA survey, the Tri-Cities was the only metropolitan area in the Pacific Northwest that wasn’t overvalued, Losey said. “That’s why we’re poised to be the first community in the region to benefit from any good news,” he said. “Just give us something.”