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Stubborn market slows, but sales still show gains in Williamsburg, Peninsula Va

By
Real Estate Agent with Mr Williamsburg/ Liz Moore & Associates

From an article in the Daily Press:

Mortgage banker Michael Mapes has approved loans for about 17 clients who have a new home they want to get into, but they can't sell their own homes.

It should be a buyer's market for homes on the Peninsula, but sellers in the region are still holding out for - and often getting - double digit gains from a year ago. Many sellers who want to trade up to a bigger house are unwilling to accept that the recent bull market is over.

As a result, inventory has built up substantially over the past few years and it is taking much longer to sell a house. Sales are still strong at lower sales prices and in select markets, such as the city of Williamsburg, but the high inventory and prices can't co-exist much longer.

"The inventory's been built up because sellers are so doggone stubborn," said Mapes. "A lot of sellers are stuck in 2005."

Halfway through 2007, fewer homes are getting sold and they are taking longer to sell, according to data from the local Real Estate Information Network. But prices have continued to rise on the Peninsula, and builders are trying to sell high numbers of homes in a slower market.

Easy credit that fueled the recent bull real estate market has also pulled back as lenders get hit with defaults on loans. But mortgage rates are still historically very low, as a large pool of homes is available to anyone willing to accept a reasonable price for their own home.

Supply of homes and condos is still growing on the Peninsula even though it took an average of 69 days to sell, up 47 percent from last year. Sales go quickest in the cities of Williamsburg, Hampton and Newport News, where it takes 56-57 days to sell.

For the past six months, Peninsula median prices have risen to $220,000, 10 percent higher than in the first half of 2006, when it was $200,000. The more expensive South Hampton Roads market only rose 2 percent to $244,900 this year.

The number of homes and condos sold in 2007 is down 9 percent on the Peninsula and almost 12 percent in South Hampton Roads. But there are some signs of growing momentum on the Peninsula, which includes the greater Williamsburg area and Middle Peninsula.

The Peninsula saw existing home sales prices rise 14 percent in June 2007 over the year before. That strong month contrasts South Hampton Roads, where sales prices were only 1 percent higher than last year.

Brian Mullins, owner of Quality Homes and president of the Peninsula Housing and Builders Association, said he doesn't expect a sellers market for about another year. He doesn't foresee any major drop in prices, but a slowdown in the price gains that have defied the growing inventory.

A slower market in 2007 hasn't kept people from listing their homes or builders from feeding the market on the Peninsula, where new listings of existing homes were still up 14 percent from the year before. The number of newly constructed homes for sale was 29 percent higher.

"That hurts us," said Mullins. "We just need to hold on and build smart."

The builders need the mid- to higher-priced existing home sales to pick up, so those owners can move into expensive new construction.

"We need to get that market moving first before we can get momentum at the upper end again," said Mullins.

Many of the new homes now on the market were planned years ago. To deal with the existing slow home sales, the builders are cutting back. Permits for new home construction are down 27 percent for Hampton Roads and 17 percent for the Peninsula, according to Source Inc. of Virginia.

The number of pending sales - where a contract has been signed, but the deal has not closed - has slightly lagged 2006 levels throughout the year. But the pending sales in June 2007 pushed higher than they did in 2006.

In contrast to existing homes, pending sales of new homes in 2007 across all of Hampton Roads has been stronger than in 2006 all year -up 14 percent total. That trend continued in June. But the number of these new home deals that actually close is down 5 percent for the year.

The contradiction between pending and closing sales of new homes might reflect contracts that are contingent on the sale of the buyer's home. During the hot market of recent years, sellers didn't accept as many contingent offers, but it also didn't matter much if they did.

"They didn't worry about it because they knew they would sell their house," said Natalie Miller-Moore, marketing director for Wayne Harbin Builder.

 

With more competition to attract buyers, contingencies are more problematic. A deal killed when someone can't sell their own home can also trigger a loss of multiple sales.

"That creates a domino effect," said Mapes. "If one falls, they all fall."

Mapes has a client who was turned down when they told the builder that an offer would be contingent on selling their own house. Mullins' company generally only builds for clients who can afford it without selling their own home, and that standard has tightened recently.

Mapes knows another builder who will accept contingent offers, but won't actually build until the buyer sells his or her own house.

Custom builders must wait for people to sell homes first, or they could build a home to specific tastes of a buyer who can't sell. Home builders that accept contracts with a contingency won't find many buyers who are comfortable that they can easily sell their home.

"They don't want to go under contract until their house is sold," said Miller-Moore.

The numbers are different everywhere. The formerly hot York and James City counties slowed down to single-digit growth for price and sales. But the small city of Williamsburg is running strong this year, with the number of sales up 44 percent and the median price 23 percent higher.

The South of the James expansion of recent years has also pulled back quite a bit in 2007. The number of sales is down 31 percent in Smithfield/Isle of Wight and 12 percent in Suffolk. The median price dropped in both communities.

The condo market has had wild price and sales swings this year, depending on the locality. The Peninsula saw sales only climb 2 percent, but prices shoot up 23 percent. The skyrocketing condo prices were led by a 34 percent gain in Hampton and a 29 percent gain in Newport News.

But on the housing side, sellers are sweetening the sale by offering concessions such as home warranties, closing costs and mortgage payments. Wayne Harbin was offering a furniture allowance, but buyers preferred to take cash to offset closing costs.

"People are very price driven now," said Miller-Moore.

Copyright © 2007, Newport News, Va., Daily Press

 

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