1/30/2012 - Asheville-area home sales increase, building still tough
by Mark Barrett - Asheville Citizen Times
ASHEVILLE -- The area's long-troubled housing market is showing signs of life, although activity is still far below levels seen a few years ago.
The number of existing homes sold in Buncombe County and three other area counties last year was up 3.3 percent over 2010. Monthly sales figures rose five consecutive months over the same month a year before before slipping 2.3 percent in December.
Home construction was still in decline, as the number of units permitted in Buncombe, Haywood, Henderson and Transylvania counties for construction was down 11.9 percent from 2010 to 2011.
Buncombe County, however, saw an 8.5 percent increase in housing starts during the last quarter of the year.
People who follow the housing market say modest improvements in the economy and gradual absorption of excess inventory created during the housing bubble last decade are the main factors behind changes in home sales.
But they caution that while some trends point to more activity, there is little reason to expect more than slow improvement over the next few months or even years.
"This year will be a year that will be interesting. I do believe it'll be the year that we say things look like they'll turn around," local real estate analyst Don Davies said.
But any return to sales levels seen around 2005 and 2006 is years away, he and other experts say.
"I think this year is going to be the year not to get too excited," Davies said.
Below the highs
The total of 4,065 existing homes sold last year in the four counties was still only 56.7 percent percent of the peak of 7,168 in 2005, according to figures from the N.C. Association of Realtors and N.C. Mountains Multiple Listing Service.
The disparity in new home construction is even greater.
Local governments in the four counties issued permits for construction of 868 single-family homes and condominiums in 2011, 22.1 percent of the total in 2006, according to The Market Edge, a research firm based in Knoxville, Tenn.
Measures of home values in Buncombe County still show some erosion as buyers of existing homes remain at a dramatic advantage over sellers because the number of homes on the market is still larger than usual.
That dampens the demand for new homes, as some buyers think they can get a better deal buying a house that has already been built and has seen several price cuts.
"The inventory (of existing homes) is still out of balance," said Mike Figura, head of Mosaic Realty. "There's more homes available for purchase than there are people willing to purchase them, so that's putting downward pressure on prices."
During the boom years nationally, too much of the economy's resources went into building homes, said Joe Sulock, who teaches economics at UNC Asheville.
Home prices and income growth usually go hand-in-hand, he said, but prices rose dramatically while income was relatively static during the bubble.
"Basically, you had too many people in construction building houses that people couldn't afford. It takes a while for that (oversupply) to work its way through the system," he said.
"Housing is slow precisely because there was such an overbuilding."
Consumer confidence -- or the relative lack of it -- is also a big factor, Sulock said.
Despite some improvement, "There's just a lot of uncertainty about jobs. Do you want to buy a home if you're uncertain about your job?" he said.
Plus, buyers "probably figure it's not going to hurt to wait" to buy a home as long as prices are relatively weak, he said.
The period between when an existing home was listed for sale and when it actually sold was 149 days in 2010 in Buncombe County, Davies said. That figure increased to 162 days in 2011.
The average selling price was down about 5 percent over the same period, he said, meaning people selling a home are having a tough time: "It's taking longer to get slightly less money."
The median selling price for a home in Buncombe County -- the point at which half were higher, half lower -- was $195,000 in December, down from $197,000 in December a year ago. It dipped as low as $174,000 earlier this year.
Federal figures show a 5.3 percent decline in home values in the four-county Asheville metropolitan area from the third quarter of 2010 to the same period in 2011.
Those figures, which include sales in Madison County but not in Transylvania County, exclude data from sales of the most expensive homes, the category where home values have dropped the most.
Another factor eroding values besides excess inventory is banks trying to unload homes on which they they have foreclosed .
"There's a whole lot of banks out there who want to sell and are doing whatever they can to get the market to come to them," Davies said.
Banks "don't blink an eye to take a $30,000, $40,000 or $50,000 price drop on a $200,000 house," he said.
Weak prices cut two ways, however. They will not make homeowners or developers looking to sell happy, but the decline has contributed to an improvement in the availability of affordable housing in the area.
Some still buy
People buying new homes are interested in smaller homes with finishes and features at least as nice as during the boom times, people in the industry say.
About 90 percent of the homes built by developer Biltmore Farms in its Biltmore Lake community in the Enka area are one of the company's "cottage" designs, which average around 2,200 square feet, said Paul Szurek, the company's chief financial officer.
The homes are significantly smaller and cheaper than those the company was building a few years ago, he said.
James Bound, of local builder Greencraft, sees similar trends.
"Almost every person we're talking to is focused more on quality versus quantity," said Bound, whose company specializes in building homes that are energy efficient and have other environmentally friendly features.
The change in preferences by Biltmore Farms buyers is almost entirely because of a simple desire to pay less, Szurek said, although Figura said other factors at work in the broader market are encouraging buyers to think small.
Aging baby boomers "are feeling they don't want to have a big house and a yard to take care of," Figura said.
Other buyers want to live in more urban neighborhoods, where houses are typically smaller than in the suburbs or are deterred by the environmental impact of larger structures.
Area homebuilders are affected by lower prices for existing homes, Bound said. But, some people are not able to find what they are looking for among the inventory of existing homes or simply want a new home designed to their tastes.
Dale Akins, head of research firm The Market Edge, said the state of the job market is the key factor affecting most of the markets he follows around the Southeast.
Asheville is different because so many buyers here are retirees, he said, but economic factors like the state of the stock market or the housing market wherever newcomers are moving from still make a big difference.
In addition to consumer confidence, a big concern for builders nowadays is getting bank financing, Akins said.
Figures for the fourth quarter of last year do offer some encouragement, but it is too soon to suggest that they are a harbinger of trend toward more building, he said.