Real Estate Values In Eastwick
by Alex Brooks
The real estate market in this area has clearly pulled back in 2008 from the boom years of 2005 to 2007. Prices are down a bit from their peaks at the top of the boom but in general seem to be above the five year average and higher than they were in 2004. While we can’t yet say that the market has stabilized, we might be able to characterize it as moving toward stabilization. All of the realtors consulted for this story reported an uncharacteristic flurry of activity in January, which seems to bode well for climbing out of the doldrums of 2008 in the coming year.
The figures discussed in this section of the story are Multiple Listing Service figures supplied by Rick Tinkham Real Estate showing sales volume and average house prices for the years 2004 to 2008. Figures on average house prices are not an ideal indicator of whether prices are rising or falling because every house is unique, and 200 houses sold in one year may not be comparable to 200 different houses sold in the following year. A decline in average house prices might indicate either that similar quality houses are declining in price or just that more high-end houses sold in one year and low-end houses sold in the next year. Remember that when Bill Gates walks into a bar, the average income of the people in the bar goes up dramatically even though their real incomes haven’t changed. Having said that, however, average house prices remain a good rough indicator of pricing trends, so we will use the figures that we have, for what they are worth.
In the Capital region as a whole, sales volume peaked in 2006. It declined a little over 6% from 06 to 07 and declined 19% from 07 to 08. Average prices in the Capital region as a whole peaked in 2007 and dropped only 2.5% from 07 to 08, remaining 19% higher than the average price in 2004.
In the Hoosick area, sales volume almost doubled from 04 to 05 and remained high for three years, peaking in 07. Volume declined precipitously from 07 to 08, declining by almost 44%. The 2008 figure, however, still showed almost 14% greater volume than the figure for 2004. So looking at sales volume, the Hoosick market gives the impression of a three year boom in 2005-2007, which is over now.
Looking at average prices in the Hoosick area, the picture seems a little rosier. Average prices peaked in 2007 at just under $141,000. The 2008 average price of $122,750 is still above the five year average and 42% higher than the average price in 2004. Whether these price gains will be sustained, of course, remains to be seen.
In southeastern Rensselaer County, though, the picture is rather different. There the sales volume peaked in 2005. It fell by 7.4% from 05 to 06 and dropped off considerably from 06 to 07, down 24%. However, it has stayed pretty steady since, dropping in volume only about 1% from 07 to 08. Average prices peaked in 06, then declined about 4% a year over the next two years. The data in this area give the impression of a market that has largely stabilized since the big drop in 2007, although with the volatile economic situation nationally and internationally, it is probably too soon to be talking of stable markets.
Sales volume in Washington County peaked in 2006 after impressive gains from 04 to 05 and 05 to 06 but has lost ground since then. From 06 to 07, sales volume declined by 12%, and from 07 to 08, volume declined by 30%. Average prices here peaked in 2007 and fell 3% from 07 to 08, remaining well above the five year average and 25% higher than the 2004 average price.
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Rick Tinkham said his office has done almost as much volume of business in 2008 as they did in 2007 but he has had to do a lot more to keep making sales. He says his office’s expenses are up 28% because of increased expenditures on advertising and marketing. He says higher-end houses are selling better than those at the low end of the market. A lot of business is coming in through the internet, people from out of the area moving in. He said there is a lot of demand at the low end if houses become more affordable. A big issue for these people is finding affordable financing. A lot of buyers who want to buy houses in the $50,000 to $100,000 range can’t qualify for a mortgage.
At the same time, said Tinkham, the mortgage market is changing rapidly. Credit is tightening up, and different banks have different rules. There are government programs to help first time homebuyers which can help, but they come with some red tape and some restrictions on resale. Tinkham said he has done four mortgages through USDA Rural Development this year. This program gives 100% financing and allows lower credit scores than a regular bank would. It can’t be used to purchase a mobile home, and if you sell the house after owning it less than 10 years, you may have to pay back some of the government subsidy. The rules are designed to exclude speculators.
Tinkham is quite optimistic about 2009. He believes new government mortgage programs may help to move the lower end of the market, and he believes there is quite a bit of money sitting on the sidelines, which may jump into the market once it sees upward movement.
Kathy Jaeger of Valerie Sutton Real Estate said 2008 has been a tougher year for her than 2007. She said there have not been enough buyers in the market and she has had less showings of the houses she has for sale. However, she said she has seen a lot more calls and activity in recent weeks, and she expects to see real improvement in 2009, spurred on by low interest rates coming out of government efforts to get the economy moving again.
Jim Martinez, of Martinez Family Realty, said it has been a quiet year. He feels the main reason for this is because people are afraid – unsure of the economy, unsure of their jobs. He related the story of another realtor’s client who became interested in a listing of his, and the house turned out to be just what the buyer was looking for – the right location, the right price, the right house – but still they were afraid to buy and the sale was not made.
He said mortgage rates are good and the banks are lending but that alone is not enough. He said it’s not going to be like it was during the boom years from 2005 to 2007. He said it will not take off again the way it did then. He looks forward to a quieter, more stable market with less dramatic increases in value from year to year, one less tempting to speculators. But he feels prices may have to fall a bit more before we get to such a stable market. He said he believes there are still some overpriced houses on the market whose owners will have to get more realistic about the current market in order to sell them. On the plus side, though, he said there has been a lot of activity in the past month and his agency has been very busy.
Gale Leva of Denim & Deeds Real Estate said it has been a very slow year. One problem she has seen this year is that buyers have gotten the idea that prices are collapsing when in truth prices have not fallen that much. The result is that buyers have made very low offers, and the sellers don’t even bother to counter offer because the difference between asked and offered is too large.
Leva said it is actually a very good time to buy a house. There is a good selection of houses on the market and interest rates are very low, so buyers can afford more house. The banks are lending, and she feels the prospect for long-term appreciation in value is very good. There are tax breaks and special financing available for first-time homebuyers. She said people are more afraid than the reality warrants. She also said her phone has been ringing quite a bit in December and January and she has been showing a lot of houses in the last month. “We’ve been out showing houses every weekend this month,” said Leva. So 2009 has started off pretty strong for her agency, and she expects 2009 to be better than 2008.
Leva said this area has not seen many of the “crazy mortgages” that have distorted real estate markets in other areas, so we are not getting, so far, a large volume of foreclosures. Rick Tinkham checked foreclosures in January and found about 25 in process in Rensselaer County, but he said they were mostly in Troy. He was aware of about five in Eastern Rensselaer County in 2008, and he knew of some others that were close to foreclosure. There may have been a few more than that, but there have not been enough to create a major drag on the market.
Overall, we can say that there has been a decline in both sales volume and price in 2008 from the slightly overheated market of a few years ago but by no means a collapse. There has been significant appreciation in the value of real property over the last five years, and there is, by and large, cautious optimism among the realtors that there will be continued appreciation in the value of real estate in the next five years, though perhaps at a lesser rate. Looking forward, however, there is a lot of uncertainty, and much depends on how the national economy goes.