Slow, steady wins when the fast fall
Our slow and steady housing market is getting a little slower. Home sales in February were off a chilly 23 percent from a year earlier, with fewer homes changing hands than in any month since December 2000. It was the worst monthly drop in three years and the fourth straight month where home sales slid by more than 10 percent.
That’s not surprising, given the surge in layoffs, the nose dive in consumer confidence and the harder line banks are taking on new loan applications.
The pace is likely to stay weak, too, with pending home sales (meaning agreed to but not yet closed) down 19 percent in February.
The good news is that, even with fewer buyers buying, the housing market here still is holding up pretty well. Proof is in the region’s relatively stable home prices. A steep drop in sales that is coupled with a big drop in sale prices is a sign of a sick housing market, and that’s exactly what we’re seeing nationally.
But not here. In the Buffalo Niagara region, median home prices actually rose by 3 percent in February and were nearly flat in January, despite the steep drop in sales.
That indicates that the local housing market still is in pretty good balance. So is the fact that, while fewer people are buying homes, fewer homeowners are putting their homes on the market with the economy so weak.
New listings are down 19 percent this year, which is an enormous help in keeping the inventory of homes for sale from becoming bloated, and putting downward pressure on prices. While inventories here have been creeping up the past four years, the six-month supply of homes for sale in the Buffalo Niagara region is much healthier than the national average of just under 10 months.
“People are saying ‘We’re not going to give our house away. We’re going to hold on for a while,’ ” says Merle Whitehead, president and chief executive officer of Realty USA.
A broader housing price gauge, culled from home sales and appraisals done for refinancings, found that home prices in the Buffalo Niagara region inched up by 1.71 percent in the fourth quarter.
While that was the smallest quarterly price increase since the second quarter of 2000, it’s far better than the 8.2 percent decline that’s taking place nationally, according to the data from the Office of Federal Housing Enterprise Oversight.
The national housing market has been so bad that homes in the Buffalo Niagara region, which was so long derided for being stuck in the mud while homeowners elsewhere got rich, has been the better long-term investment over the last five years. Our housing prices were up 19.9 percent, while home values nationwide rose by just under 13 percent. That means home prices here rose about one-third faster than the national average from 2003 to 2008.
That’s an incredible turnaround, one that speaks more to the housing bubble bursting elsewhere than our own relatively stable home values.
Still, it’s clear the credit crunch and the shrinking economy are hurting the local housing market. The longer the recession drags on, the greater the chance that home sellers will tire of waiting and be forced to settle for less because of the scarcity of buyers. That could push down housing prices here.
But if people get the sense that the economy is starting to turn around, they’ll have incentives to buy, including the federal government’s $8,000 tax credit for first-time buyers and mortgage rates around 5 percent that make monthly payments more affordable.
“I think we’ve got a lot of people standing on the sidelines with their hands in their pockets,” Whitehead says. “But I think by the end of the year, they’ll pull the trigger.”
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