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Sellers waiting for recovery in area housing market: Economist expects another nine months of 'slow going'

October 29, 2007

Melinda and Brooks Bertl know the ups and downs of the current real estate market-personally.

They started looking for a home to buy this spring and it took them only two weeks to find one they liked in Carmel.

"I guess we knew what we wanted and found it. And the house had been on the market for some time," said Melinda Bertl, indicating the sellers were ready to make a deal.

They bought the house and moved into it. That was the up side.

In March, the couple put their Castletonarea home on the market, where it has languished ever since. They've lowered the price 15 percent and recently installed new carpeting throughout the A-frame, tri-level house to make it more attractive to prospective buyers.

Since listing the property, the Bertls have had two offers well below their asking price. Behold the down side.

Recent data from the Metropolitan Indianapolis Board of Realtors show they're far from alone.

The nine-county Indianapolis metropolitan area had 1,998 pending sales of singlefamily homes and condominiums in September, down 16.8 percent from the same month last year. Year-to-date, sales of single-family homes and condos are off 7.3 percent from the first nine months of 2006.

"Central Indiana's housing market is continuing out of balance and inventory levels are still increasing slightly," said James Litten, president of F.C. Tucker Co.'s Residential Real Estate Services Division, which compiled the data.

Indeed, the more than 20,600 active listings in September were up 5 percent over the same month last year.

What is worse is that inventory is taking an average of 8-1/2 months to sell, according to Dax Meredith of housing research firm MetroStudy. Anything over six months makes it a buyer's market, Litten said.

Despite the delay-and the decline-Litten said the number of homes sold this year still could be the fourth most in Indianapolis history if the current pace continues.

"In every market in the city, there are homes being sold," he said.

Hancock County saw a 20-percent increase in pending home sales in September compared to the same month last year, and a 1-percent increase in sales for the first nine months of the year compared with 2006.

But Hancock's numbers are miniscule compared with those of the larger market-60 pending homes sales for September compared with 2,400 for the nine-county area. Such small successes don't necessarily represent a wider view of the region, Metro-Study's Meredith said.

Fortunately, the same can be said for small counties that aren't faring well.

Boone County, for example, had 43 pending sales in September, down 42 percent from the same month last year. Year-to-date homes sales were down 3 percent there.

The picture isn't any better with newhome sales.

Permits for new single-family homes are down year-to-date, according to data from the Builders Association of Greater Indianapolis.

"Home builders are appropriately cutting back on new supply to meet current market conditions and acting aggressively to offer great incentives to boost sales," BAGI CEO Steve Lains said on the association's Web site.

While the housing market in Indiana is stronger than that of the nation as a whole, slow employment growth means the Hoosier state is likely to see widespread soft markets, said Bill Witte, co-director of the Center for Econometric Model Research at Indiana University.

Indiana saw only a 0.6-percent increase in total payroll in September, Witte said. "That's not very good. We are in for another nine months of slow going."

Asked why people are not buying, Litten put the blame on poor consumer confidence. He said it is one of three factors that fuel home buying, along with interest rates and job stability. Mortgage rates are "very attractive" in the 6 percent range, he said, and at 4.5 percent, unemployment is low.

"The thing we cannot control is consumer confidence," Litten said.

And when people worry, it has a ripple effect because they don't spend money.

That's something the Bertls know well.

"It's not a conducive market right now for people selling their homes," Melinda Bertl said. "Just lowering the price doesn't entice people to buy."
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