Sales, prices kept dropping in 2008

SANDPOINT - The headlines kept up a glum drumbeat of financial news, delivering the latest stats on housing starts. For November, the number of new homes being built in the U.S. dropped nearly 20 percent, marking the worst performance in 25 years.

The most recent data from the Commerce Department showed that sales of newly built single-family homes dropped by 5.3 percent in October, with the median sales price sliding to its lowest level in almost five years at $218,000.

And even though the inventory of new homes dipped by a record 8 percent for the period, the slow pace of sales meant that it would still take more than 11 months to clear the inventory of homes already on the market.

The National Association of Realtors didn't offer any break from the bad news for October when it released statistics for existing home sales - a measure of how many single-family homes and condominiums find buyers. Sales of those properties were off 3.1 percent compared with the prior month, while median sales price dropped more than 11 percent to $183,300.

But despite lower asking prices for existing homes, the Realtors group estimates that it would take more than 10 months to move through the inventory of currently listed properties.

Here in Bonner County, the average selling price for residential listings decreased by 7 percent through mid-December, compared with home sales activity for the 2007 period, based on information provided by the Selkirk Association of Realtors MLS. The average time on the local market was nearly five months. The fastest-moving sale took close to three months to close, while the slowest seller hung around for 266 days.

In short, there are still more homes than there are buyers and the off-kilter supply and demand cycle that had its roots in the housing boom of 2005 remained a drag on the market during the year that is just coming to an end.

See REAL ESTATE, Page 3

One year ago nearly to the day, outgoing 2007 Selkirk Association of Realtors President Dale Pyne discussed how too much inventory - mostly of "spec" homes built on the heels of the white-hot real estate market in 2005 - had affected local housing prices and caused a correction in terms of fewer sales happening at lower prices.

This month, Lana Kay Hanson, the outgoing 2008 president for the Realtors association, talked about how the correction continued throughout the past year and why she believes there is opportunity embedded in the lower housing statistics.

How would you characterize the 2008 housing market?

It was a continuation of the bad market we've seen since 2007. But there was some activity in November. It may not be gung-ho - they're not knocking down the door - but people are realizing they can't sit back forever.

What's your forecast for when the market might start to move upward?

I think we're going to see these lower prices for at least another year, maybe longer. I do think that it's turning, though. Not that prices are going up, but because people are starting to buy because of the deals out there.

So there are some good buys because of tough times?

Extraordinary buys. There are some fabulous buying opportunities right now. But what I'm finding is that the new buyers - people who are just coming into the market for the first time - think they can get it for even less.

With the lower sales price trends over the past couple of years, could they be right about waiting out the market a while longer?

I think we've hit the bottom, price-wise. We're there. It may stay level for a long time, but as soon as more money comes into the market, prices are going to go up.

It's always the same story and it's the same thing I've seen over the years. If you've got the money and you don't buy in a market like this one, you're going to kick yourself in 10 years.

Have the mortgage crisis and the drop in the stock market had as big an impact on this region as in other parts of the country?

Yes, but it just takes us longer to feel it here. We're just starting to feel it now. Take, for example, someone who moved here and owns a home free and clear. That sounds good, but that same person might be depending on the stock market for the income to get them through. We know it's happening all over - what we don't know is how it's all going to affect us here.

Last year, the trend was that homes on both the low end and the high end of the price spectrum were moving somewhat better than the majority of listings. What was the trend for 2008?

That's still true. A lot of the high-end stuff, though, was sold to people who already had a deposit on it and had to close or lose that money.

Housing-related headlines in places like Phoenix and Las Vegas are saying, "$500,000 is the new million."  Do you anticipate seeing the million-dollar listings going down in this market?

They're already down. If someone had a listing for $1 million-plus in 2005, it's probably in the $700,000-plus range now. Those properties have already taken the hit. Nobody was sheltered from this. But it had to come back to realism. Everything was getting out of range too fast.

Did the upward price spiral that preceded this correction start in 2005, or did it begin even earlier?

It really started in the fall of 2004. I remember seeing the statistics for home sales that November and December and realizing at the time that we really hadn't seen anything like it before, as far as how many things were starting to sell during the winter months. Unfortunately, some people are still thinking their property is worth those 2005 prices.

Did 2005 also bump the curve as far as how many people got into the real estate sales field?

Yes, but that's changing and we're starting to see some people drop out. We've had too many part-timers in this community because they thought they could make a quick buck. Real estate is a full-time job and I think a lot of people who got in will be taking a second look at this career and asking themselves, 'Is this something I really want to do?'

It used to be said that we run about five years behind California as far as what the housing market is doing. Does that still hold true?

Yes, but it's shortened to about three years. We're really riding behind all of the other markets that are having tough times.

Do you think the banking bailout will have an effect on home sales here?

I'm waiting to see how this bailout shakes out - to see how much money actually filters down to local lenders.

You mentioned that there are some strong buying opportunities, but can the average person get financing to take advantage of the lower prices right now?

There is financing. All you have to do is find it. And if traditional financing is not available on a property, try for an owner-carry contract. We're writing those right now. There are more people willing to do that in order to sell a property and get the income coming in.

The housing market hasn't been immune to the financial turmoil. With that in mind, is real estate still a sound investment?

I still believe what I've always believed:  There is nothing as safe on Earth as earth.

You've been doing this for a while now and you've had to ride out a few business cycles. What's your advice to a new Realtor who hasn't experienced the ups and downs of the local market?

I would tell them a couple of things. First, when times are tough, you need to advertise. I opened Lana Kay Realty in 1980 - a year when nothing was selling. So I bought a full-page ad in the Daily Bee and started getting calls. It made people feel better to see that there was still someone who was working to sell the listings that were out there at the time.

The other thing I would tell them is that we are a community of survivors here and, when times get really tough, we've got to help each other out. When you get cutthroat, you don't get anyplace. But if we work together, everybody can survive.