Thursday, Nov. 8, 2007

Sellers play waiting game

September home sales lowest in six years

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Christopher Anderson⁄The Gazette
Carla Hurley has dropped the price of her home by $30,000 in the seven months it has been on the market. Hurley is among thousands in the county struggling to sell homes at a time when the market is the slowest it has been in six years.
For the past seven months, Carla Hurley’s life has consisted of fielding phone calls, canceling weekend plans and walking strangers through her home.

‘‘It’s a nightmare,” she said. ‘‘If I had to do it all over again, I would not be doing this, seriously.”

Since she put her Clinton home up for sale, Hurley has gone through one Realtor, four price reductions and a slew of people coming to see her four-bedroom, split-level home, but none wanting to buy it at her original asking price of $409,000. Now it’s $379,000.

‘‘It’s just frustrating to know how much your home is worth and how much work you put into your home, and now you can’t get any money out of it,” she said. ‘‘Now I’m just trying to pay off the mortgage. I’m not trying to make any profit off of it.”

Hurley’s woes aren’t unique. There are literally thousands like her in Prince George’s County, hoping to find buyers as home sales reach their lowest point in more than six years.

As of September, 465 houses were sold in Prince George’s – half the number sold in September last year and the lowest number of homes sold in a month in the past six years, according to statistics from Metropolitan Regional Information Systems, a national collector of housing data.

October statistics are expected to be released Saturday.

‘‘Things have slowed up significantly,” said Emanuel Williams, office manager for the Coldwell Banker real estate agency in Lanham.

The county market peaked in August 2005 when 1,547 houses were sold in one month. In 2006, it wasn’t unusual for more than 1,000 homes to be sold in a month. This year, the number of homes sold in a month hasn’t broken 800, according to MRIS.

The problem isn’t due to a low supply, according to statistics. As of September, there were nearly 7,000 unsold homes on the market. The homes that were sold in September spent an average of 95 days up for sale, double the average in September 2006, according to sales data.

Money matters

Agents and experts say the problem lies with financing. For years, real estate sales thrived on low-interest, sub-prime loans, which allow buyers to purchase houses and temporarily pay a lower mortgage. But the people who took the loans have begun to default at high rates since interest rates increased and the timeframe for their lower interest rate loans has ended, causing mortgage payments to soar.

According to RealtyTrac, a company that lists foreclosed properties across the country, there were 1,519 properties in default or foreclosure in Prince George’s County between July and September. The properties accounted for nearly a quarter of the 6,530 foreclosed properties in Maryland.

Investment companies that had bought those loans are now rethinking their giving strategies, which could have serious repercussions for buyers, said Albert S. ‘‘Pete” Kyle, a finance professor at the University of Maryland, College Park.

‘‘Conventional mortgages are going to be looking like a much better option,” he said, referring to loans that have a fixed interest rate for the entire length of the loans. ‘‘But there’s going to be a huge difference between the rates for people with good credit and large down payments and the people who don’t. And that difference will widen dramatically in the coming years.”

Banks have become much more rigorous about providing home loans, making exhaustive credit checks and requiring more money for down payments, and real-estate agents said they are seeing the effects.

‘‘There are houses, and there are people who want to buy,” said Linda Simpson, president of the Prince George’s County Association of Realtors. ‘‘But it’s all depending on the financial end. That’s the biggest deterrent right now.”

Even buyers with financing should think about the value of a home investment since prices are likely to go lower, Kyle said.

Although home sale prices are about 5 to 7 percent lower than they were last year, Kyle said many are predicting a 14 percent overall drop in housing prices in the next few years in the region.

‘‘It’s not like the stock market, where a price will adjust in a matter of hours. In real estate, things just slow down,” he said.

Ann Gordon, a renter in Bowie who is planning to buy a house, said prices have not dropped enough. She attended an open house Saturday in Bowie’s Fairwood neighborhood, asked the Realtor a few questions and was out the door in 10 minutes.

‘‘Everybody is holding on,” she said as she left. ‘‘It needs to get cheaper.”

Like many buyers, Gordon actively searches for houses but has no intentions of buying until she believes the market has bottomed out.

‘‘It’s to get more house for your money,” she said.

In search of equity

For those not currently buying or selling, equity in their homes has become a concern.

Builders have adjusted to a troublesome inventory by thinning out their pipelines and delaying starts, said John Kortecamp, executive vice president and CEO of the Homebuilders Association of Maryland. ‘‘Larger builders have been very aggressive about trying to shed their inventory through significant price reductions and sales,” he said.

For example, in the Oak Creek community in Upper Marlboro, Craftmark Homes is offering a model that was once $1,078,295 for $958,295 – a $120,000 difference.

The discounts can result in someone paying much more for a new home than a neighbor with the same home; they can pay much different prices based on when the purchases took place. Those who purchased at the higher price lose out on equity, and selling the higher priced home when neighbors have paid much less can be a nightmare.

New homes, in some cases priced similar to some older homes, have made it even more difficult for longtime homeowners.

The Kirbys, a retired Laurel couple, have seen their friends struggle on the market. Several friends have had their homes for sale for six or seven months, while others have been forced to rent their properties, they said.

Even neighbors selling houses in their relatively new community of Central Parke at Victoria Falls have had trouble because of lost equity.

‘‘It’s hard to sell an existing home when there’s a new one down the road,” Cal Kirby said.

The Kirbys said they aren’t as worried as most about lost equity because of their age. They purchased their home three years ago after selling their previous Laurel home in less than a day.

‘‘The Realtor was literally hammering in the for sale sign when someone pulled up,” Linda Kirby said. ‘‘When people ask how long it took us, we say about a half hour.”

Home-industry experts expect the market will improve after the new year.

‘‘Real estate is a commodity, like gold,” said Williams of Coldwell Banker. ‘‘People do need a place to live. ... But I understand I’m probably not an objective person.”

Still, others say the slump could last longer. Kyle said the slowdown could last ‘‘several more years.”

County budget officials have lowered their expectations for revenue from real estate sales through the end of fiscal 2008, expecting a 25 percent overall drop, and said they will likely lower their expectations next year, as well.

‘‘We’re projecting the slump will continue through June,” said Jonathan R. Seeman, budget director for Prince George’s County.

E-mail Daniel Valentine at dvalentine@gazette.net.