The price declines underscore the severity of the correction in the once-booming housing market.

Local Trends Reflect National Home Price Drop, Largest In 35 Years

By John Voket

Newtown real estate professionals and their clients listing homes for sale are feeling the pinch as the national downtrend in median pricing hits home. Locally, agents are seeing between an eight and 15 percent average drop in prices against what similar homes in similar neighborhoods were selling for just last year.

“It’s probably the worst I’ve seen in 15 years,” said Cathy Masi, an agent at Flagpole Realtors on Main Street.

Nationwide, September saw the most dramatic drop in median home pricing in more than 35 years, even as the pace of sales rebounded for a second month. The Commerce Department reported that the median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005.

It was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970. The weakness in new home prices was even sharper than a 2.5 percent fall in the price of existing homes last month, which had been the biggest drop on record.

The price decline for new homes came while the sales pace picked up, rising by 5.3 percent to a seasonally adjusted annual rate 1.075 million homes. It marked the second consecutive increase in sales following three months of declines.

This trend is reversed locally, according to Ms Masi.

In the period from August 7 to November 7, 2005, 131 single-family homes were sold in Newtown with an average sales price of $553,195. During the same period in 2006, only 92 homes were sold but the average sale price was up to $593,998.

In Newtown, September’s National Association of Realtors report showed sales volume was down 34 percent and listings were up 40 percent. The average sale price at that time was $621,000, and average on market time was up 15 percent. The Consolidated Multiple Listing Service data for the region showed for sale listings up 24 percent from same period a year ago, pending sales down 18 percent and sold properties down 15 percent.

Richard DeLollis, president of the Newtown Board of Realtors and an agent for Coldwell Banker Residential of Newtown, remained cautiously optimistic based on trends he is seeing at his office.

“I don’t think it’s that bad here,” Mr DeLossis told The Bee during a recent interview. “[At our office] the median home sale price through October 30 is $540,000 against an average sale price of $587,000 through June. That means we’re only trending down about eight percent.”

The price declines underscore the severity of the correction in the once-booming housing market, which had seen sales of both new and existing homes soar to record levels for five consecutive years, propelled by the lowest mortgage rates in more than four decades. This year, with mortgage rates rising through midsummer, sales have cooled considerably, with housing expected to trim more than a percentage point from overall growth in the last half of the year.

The debate is whether the slowdown will be enough to push the country into an outright recession. The Federal Reserve, recognizing the weakness in housing, halted a two-year string of interest rate increases in August and left rates unchanged through its last meeting. The Fed, however, gave no indication that it planned to start cutting rates because of the weakness in housing, saying it was still concerned that inflation remained too high.

“Interest rates are holding their own,” Mr DeLollis said. “And the market seems to think those rates will hold in the short term. Another positive point is that financially, portfolios of investors are a bit better than a year ago.”

The 5.3 percent rise in new home sales in September followed a 3.8 percent rise in August and was the biggest one-month gain since an 8 percent increase in March. Sales had, however, fallen for three straight months from May through July.

The rise in sales last month was led by a 23.9 percent jump in the West. Sales were also up 6.9 percent in the South. In the Midwest, however, sales were down 6.3 percent, and had plummeted 34.5 percent in the Northeast.

Gary Gilroy, an independent agent and owner of Newtown-based Alpine Realty, said he is seeing 10 to 15 percent reductions on active listings.

“These reductions, I believe, are due to the extensive market times and inventory,” Mr Gilroy said. “We’re seeing more and more listings expiring versus going under deposit. There’s just lots of houses, few buyers, and asking prices we were getting in a few days after listing are dropping significantly over the course of the contracts.”

Mr Giroy pointed to recent Multiple Listing Service data showing one local listing that dropped from $749,900 at the beginning of a contract to $679,000 currently.

“This is reflective of the trend locally,” he said.

“It’s everywhere you look,” Ms Masi echoed, “and it’s clearly a buyers’ market, so the buyers are aware when they’re out there making offers.”

Ms Masi and other local real estate agents say the best way to keep the offers as high as possible is to maximize the appeal of one’s property.

“Getting the house in the best possible condition is the best thing sellers can do,” she said.

Valda Thompson, office manager at William Raveis Real Estate, said her office is seeing an average drop in sale price at 15 percent. And she agreed that it is the buyers who catch on first when the market turns.

“The sellers who can make the price and property as appealing as possible are selling the fastest and getting closer to what the original asking price may have been,” she said. “Sellers need to start making concessions — they haven’t had to do this for some time.”

Offering incentives like buyers’ credit at closing to cover costs and first-year home buyer warrantees are just two of the ways sellers are attracting buyers willing to pay a bit more.

“For first-time buyers, a home warranty is a very comforting thing,” Ms Thompson said.

Mr DeLollis said agents and sellers are countering the trend as best they can using tough market strategies.

“We’re supplying a lot of creative sales and marketing information to help sellers understand the supply and demand of real estate as a commodity,” Mr DeLollis said. “Right now inventory is on the high side, and the higher the price goes, the more days on market the seller should expect.”

The drop in sales prices and the extension of times on the market are a difficult phenomenon for lot of agents who are relatively new to the business, Ms Thompson said.

“They don’t know what a normal real estate market is,” she said. “I’ve been around long enough to remember when it did take six months to sell a house. It’s only in the past five to ten years that things went in the other direction — with multiple bids coming in on brand new listings.”

As far as Ms Thompson is concerned, the current market is more reflective of a normal market.

“We’re where we need to be right now,” she said.

Ms Masi likens the housing market to the stock market.

“We have a bump,” she said of the recent trend. “But sellers need to realize that demands for housing will always be there, and buying in Newtown will always be a good investment.”

Ms Thompson concurred.

“There will always be a housing market, and I don’t think this is a bad market,” Ms Thompson said. “We’re seeing an average drop in sale price at 15 percent. So we try as best we can to counter that by advising our clients on three important factors: price to show, appeal to the buyer and, most importantly, appeal to the bank appraiser at the price you want. These three processes must be met.” Ultimately, she said, it is the bank appraiser who has the last word when determining the price ceiling for any home being listed.

(Associated Press reports were used in this story)