Real Estate market showing signs of recovery
Local home sales numbers for the first quarter of 2007, which ends tomorrow, show the worst quarter for residential real estate sales in recent memory. Sales, as of Wednesday, were roughly 15 percent below those for the first quarter last year, when the real estate market was in the midst of dramatic downward slide that came with construction delays and job losses.
But first-quarter home sales numbers — fortunately, for those whose livelihoods depend on them — do not tell the whole story.
Despite sales dropping from January to February before rising again slightly in March, experts confirm that home investors are out again, filling the pockets of local Realtors and sellers, and beginning what some predict will be a slow climb back to some sense of normalcy in the market.
Some 82 homes are currently under contract along the coast in this newspaper’s coverage area, and in Millville and Ocean View — only 10 fewer than the number of homes sold during the entire period from Jan. 1 to March 28.
Some experts expect the majority of those contracted homes to be settled and that they prop up a real estate market in desperate need of some propping. Others are more wary about predicting a turnaround in what they call an unpredictable market. Only 33 homes were sold in January, with 26 sold in February and another 33 through March 27.
“I just feel like, overall, we had a better first quarter,” said Vickie York, a Millville Realtor. “The buyers seem more interested. The sellers seem more realistic. I’m cautiously optimistic,” York added, saying the last couple weeks have been slower.
Remax Realtors Frank Serio and Kathy Goodman were more optimistic that the recent wave indicates the beginnings of a recovery.
“I’ve been busier this first quarter than last year. People recognize interest rates are low and property rates are good,” said Goodman, adding that home sales in the area may never recover to mythical 2004 and 2005 levels, during height of the building boom. “I don’t know how that happened or why … (but) this area is still very desirable for people coming from the (metro) areas. It will always have that attraction.”
Serio said, “People (buyers and sellers) are getting realistic,” and not expecting appreciations that saw some homes quadruple in price in the last seven or eight years and may have helped cause the bubble to burst in late 2005.
In an example of tremendous property appreciation, a four-bedroom townhome north of Fenwick Island, in Water’s Edge, that sold for $406,000 in early 2001 is currently under contract for $1.275 million. At least one local Realtor expects that number to come down with settlement, after the downturn checked what some called inflationary appreciation levels.
In 2005, according to real estate listing numbers, 871 homes sold in Bethany, North and South Bethany, Fenwick, Ocean View and Millville. That number dropped more than 50 percent in one year, to only 417 – a reality check that likely sends chills through construction and real estate professionals.
Sussex County issued fewer building permits in those areas in 2006, 214, than in any other year since 205 were issued in 1992. (Some 6,300 have been issued in the Coastal Point’s coverage area since 2000, which led to a dramatic building boom and influx of homes and home sellers that contributed to last year’s fall off, Goodman and others have said.)
Tom Halverstadt, senior vice president of Carl Freeman Companies and general manager of its home development division, said Freeman reduced staff to cope with down times, reportedly a normality since the dramatic drop off.
Bruce Mears, a local custom design- and speculation-home builder, said he also “adjusted staff” to meet demand last year.
The slumping market is also expected to cause a 20 percent drop in Sussex County real estate transfer tax revenue in the 2007 fiscal year, as compared to 2006. Ocean View and Bethany Beach governments have felt roughly 50 percent drops in transfer tax revenue since late 2005, when compared to preceding years.
A 100 percent property tax increase (to 16 cents per $100 of assessed value) helped cover the difference in Bethany and a 9 percent increase is proposed — and could be the first of many — for Ocean View.
Mears and his company performed an inter-office study over the past six years to gauge the market and, in turn, gauged last year’s downturn.
They received 15 to 45 customer calls per month in the six years leading up to 2006, the company study revealed, according to Mears. From January to July 2006, his company only received 18 calls. Mears said the extent of last year’s downturn was unprecedented in the area.
“This slowdown was a little different than I was used to,” Mears said. “I’d not seen it slow down so drastically. I’ve lived here my whole life.”
Mark Dieste, a custom-home builder, said his company, Deasti Design Build, did not suffer any layoffs — his custom-home and remodeling business remained mostly normal, he said — but they inevitably noticed the slowdown.
“I think the media hype, and all that stuff about real estate and bubble, has put people on the sidelines,” Dieste said in a phone interview last week. “It was very slow toward the end of last year. (But) I think it’s coming back. Things are definitely picking up,” Dieste added.
Mears said the recent swing in the right direction has been more than noticeable.
“Now things are back to normal,” Mears said. “Our phone is falling off the wall. We’ve got 12 people a week applying for jobs because people laid them off. I’m definitely optimistic.”
While numbers are creeping up, and businesses such as Mears’ are already experiencing a resurgence of good times, experts still predict any recovery to be a gradual one and likely painfully slow, especially for workers left out of work.
Bigger construction projects, officials have confirmed — such as the more than 3,000 home Millville By the Sea and Freeman’s 1,600 home Bayside — are expected to continue as planned on 10- to 14-year delivery schedules. It is yet unclear what the market will hold for smaller building projects.
“It’s just going to take a while to get out of this,” Serio said. “This is the beginning of the correction. We have 14 months,” the Realtor estimated. “But it’s a great time to start buying.”