Tri-City housing market favoring sellers

Real estate activity picked up in July; homes sold in first half of year down 17%

Tri-City homes sales are picking up speed and the lower-priced market is starting to favor sellers, industry officials say.

“It’s nuts,” said Glen Clark, president of the Tri-City Association of Realtors. “If they’re priced well and the condition’s good, they’re selling in a week.”

The number of homes sold in the first six months of the year was down about 17 percent compared with the same time last year, from 1,517 to 1,261, according to the information from the association.

Activity picked up in July with 336 homes sold, compared with 298 in July 2008. That means total sales this year lag last year by about 12 percent through July.

But if no new homes priced at $150,000 or below came on the market, it would take about 3.3 months before that inventory was all sold, according to information from the Tri-Cities Multiple Listing Service. That’s based on the average sales pace in the particular price range in the last 12 months.

A market is considered balanced when the home supply would last about six months.

“We’re really liking the numbers. A lot of sellers are thinking they can sell, so more listings are coming on, but they’re selling.”

All homes priced between $150,000 and $200,000 would be sold in 4.2 months. And in the $200,000 to $300,000 range, it would take about 5.7 months to deplete the inventory.

The upper end of the market continues to struggle with oversupply. About a 13.5-month supply remains of homes priced from $400,000 to $500,000.

Unlike some areas of the country, prices in the Tri-Cities have continued to hold, according to information from the association.

The average sales price for the first half of the year was $185,500, down about 1 percent from $187,300 in the same time in 2008.

The median sales price, meaning half of the homes sold for more and half for less, also declined about 1 percent, from $164,100 in January through June 2008 to $162,600 during during the same time in 2009.

Building activity has picked up in recent months, said Jeff Losey, executive director of the Home Builders Association of Tri-Cities.

At the end of the first quarter the number of new home permits was off nearly 46 percent. By the end of June, permits were down 28 percent from the same time last year, from 720 to 519. And as of July 31, permits were off 18 percent, at 678 total for 2009.

“It’s still tough for builders to get money” for spec homes, Losey said. “If they are established builders that have a history of being able to sell their spec homes, they can get loans.”

While some consumer worry about the local housing market seems to have dissipated, real estate officials have expressed concern about new rules for home appraisals that went into effect May 1.

The Home Valuation Code of Conduct, an agreement between Freddie Mac, Fannie Mae, the Federal Housing Finance Agency and the New Your State Attorney General, is intended to ensure appraisers aren’t pressured to push up home values, according to the agency.

The code effectively cuts off communication between lenders and appraisers, said David Brown, a Kennewick appraiser. The purpose of the appraisal is to ensure for the bank that the price is reasonable.

More lenders are now working through third-party companies that hire appraisers, Brown said. They often look for the lowest bidder, raising concerns about quality, he added.

Plus, Brown finds the third-party companies, called appraisal management companies, take about 30 percent of an appraiser’s profit.

Information from the Federal Housing Finance Agency refutes that the new code favors third-party companies. “For the first time, the code places the same requirements for  for appraiser independence on AMCs as the limits placed on lender, according to a recent notice from the agency.

Brown also said more of his appraisals than before are coming in low, which he attributes to stricter underwriting standards. But when the appraisal ends up low, deals can fall through, he added.

Real estate officials agree that low appraisals recently have been an issue. The Federal Housing Finance Agency also reports the new rules aren’t to blame for low appraisals. “The code insulates appraisers from pressures that led to higher or lower appraisals and should now lead to more accurate valuations,” according to a recent notice from the agency.

Aside from some of the biggest regulatory changes in Brown’s 17-year career as an appraiser, he said the local housing market seems to be holding up.

“The Tri-Cities as a whole came through without many blemishes,” he said, adding oversupply isn’t a huge problem and employment remains strong.

The area hasn’t suffered the wave of foreclosures seen in other parts of the country where housing prices ballooned then crashed, which has helped keep home supply in check.

But notices of trustee sales, meaning homeowners have 90 days to get their payments current or to sell their homes before foreclosure, have risen more than 11 percent in the first half of the year compared to 2008.

Notices increased from 434 to 483, according to information from the Benton-Franklin Title Co. The foreclosure rate in the Tri-Cities in June was 0.9 percent, up from 0.6 percent a year earlier according to First American CoreLogic, a national real estate data and analysis company. That compares with a 1.3 percent rate statewide and a 2.63 percent rate nationwide.

The number of foreclosure filings from July 2008 to June 2009 was 1,856, compared with 1,821 in the prior 12 months according to First American.

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