Residential real estate continues to feel the aftershocks of short sales and foreclosures
I was a bit encouraged by an article in the Wall Street Journal yesterday entitled . On a national scale, the writers state that the volume of new home sales in April 2011 did in fact increase along with median prices over 30 days earlier. The downside was that the “overall pace of sales remained weak.”
Looking back a year ago, the Federal tax subsidy for first time home buyers was in full swing, which caused a mad rush to get in quick before the incentive program expired. The difference this year is that without the subsidy sales are still down as much as 23% compared to 2010 .
In Frederick County, Maryland the sense of the market is best stated by Betsy Cain, Director of New Home Sales at my former firm Mackintosh, Inc., Realtors: “It’s like being in the Army, we’re marching through it.” Cain stated that while the resale housing market continues to show slippage in the average house price, builders in Lake Linganore and Point of Rocks have had good success in holding to their base prices.
This is significant due to the strong negative impact that the long run of short sales and waves of foreclosures have had on resale values over the last 48 months. Take, for example, the fall in the median house price of resale homes in and around Frederick City. According to Zillow.com, prices hovered around $317,000 in March of 2007 and four years later that figure is $208,000. That’s a steady fall of about 8.5% per year.
Of course, a reasonable part of this price change is also due to a shift in buyer preferences. A larger percentage of smaller houses are selling today than they did in 2007, according to Buzz Mackintosh, Vice President and General Manager of Residential Sales at Mackintosh, Inc.
The shift cannot be retriggered. in buyer preference is pushing the new home builders in the market to introduce new models. Last month, Shawn Kelly, V.P. of Marketing for Greentree Homes stated that his firm unveiled a 1,700 one story ranch home model at their projects in Virginia and at Tuscarora Creek in Frederick. “The response has really increased the visits to our communities in the last few weeks,” he told me.
Cain reinforced that statement by boasting of a recent sale of a ranch model in Canal Run for a price of $575,000. She said that while Frederick buyers tend to be “solid with good credit,” it is evident that we are in a time of “No-More-Big-House…Buyers are clearly avoiding maximizing their credit.” But, at the same time they are opting for smaller houses with loads of options and amenities, she said.
The real estate market is all about change in times of cyclical adjustments and the housing market, among the many sectors we follow, will continue to morph until it is fully flushed out. While some may be able to see what appears to a light at the end of the tunnel, housing still has a long way to go.
The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes for TheTentacle.com.