Those Realtors and real estate experts say because the housing market is swamped with foreclosures, it’s taken a drag on home values, sales and new building permits.
But what makes this year during the busiest time for home sales different is that unlike other parts of the economy, the housing market isn’t getting better as fast as other parts of the economy, such as the jobs market. And more foreclosures are expected as the backlog of processing catches up, said Shaun Bond, University of Cincinnati associate professor of real estate.
Almost 42 percent of all houses sold in April in Greater Cincinnati were lender involved, meaning they were either banked owned or short sales, said Phil Morrical III, director of development for his family’s Hamilton company Morrical Realty and on the operations committee of Multiple Listing Service of Greater Cincinnati.
Short sales are agreements between the bank and homeowner to sell the property for less than what’s still owed on the loan.
A report released by RealtyTrac Inc. Thursday said Ohio foreclosures sold for on average 41 percent less than the average price of properties not in foreclosure the first quarter this year, the highest discount in the country. RealtyTrac is a California company that maintains an online listing of foreclosure filings.
The steep discounts on foreclosed properties are attractive to investors looking to make money and younger adults looking to buy their first house, Morrical said.
“It’s dragging down the average-sold prices,” he said. “It’s a great opportunity if you’ve got great credit.”
The biggest holdup to buying a property now is getting a loan, said Paul Renwick, a broker for Keynote Realtors of Middletown and president of the Middletown Board of Realtors. Lending standards have gotten tighter and lenders are more scrutinizing of properties, Renwick said.
As a result, housing sales in Middletown and Hamilton have been declining. But 2010’s numbers are skewed due to the first-time homebuyer tax credit incentive available last year. Through Wednesday of this year, 155 units have sold in Middletown and 187 in Hamilton.
“That’s what I’m thinking, we’re going to be close to the same (as last year),” said Rewick.
There were foreclosure filings — default notice, scheduled auctions or bank repossessions — made against 1,036 properties in Butler County in 2006, according to RealtyTrac. In 2008, that increased to filings made against 3,532 properties. Last year, filings were made against a total 3,333 properties, an increase of 221.72 percent from 2006, according to RealtyTrac.
Over the same time, Middletown went from selling 682 single-family residential properties in 2006 for an average sales price of $95,071 to selling 531 properties in 2008 for an average price of $70,804, according to data from the Cincinnati MLS. Last year, 436 properties sold in Middletown at an average price of $64,804.
In Hamilton, 731 properties sold in 2006 for an average price of $84,956, according to the Cincinnati MLS. Two years later, 501 properties sold for an average price of $68,428 and last year 410 properties sold at an average $64,355.
However, the Cincinnati-Middletown housing market is the best in the state based on home prices, according to price indexes from the Federal Finance Housing Agency. And Ohio has relatively fared better than other parts of the country, such as the South and Michigan, Bond said.
As the rest of the economy continues to improve, it will provide more certainty for people to buy houses and get jobs to make the money to get home loans, said Bond. Normal transactions have slowed, due some to credit restrictions and some to the lack of certainty about jobs, he said.
Unemployment hit a high of 10.7 percent in Butler County in January of last year and in April dropped to 8.5 percent, according to Ohio Department of Job and Family Services.
Bond said the housing recovery could be years away, but he thinks the worst has passed.
“I really believe it is waiting for these foreclosures to work their way through the system,” he said.
Net loans and leases of banks have actually gone up, said James Thurston, spokesman for Ohio Bankers League.
“If you’re qualified, you have no problem getting a loan,” Thurston said. The problem is fewer people are qualified. He added, “Until the job situation recovers, improves, you’re really not going to be able to attack the foreclosures head on.”
Here’s how Bond said foreclosures have affected key measures of housing:
Home prices
The housing crisis increased the supply of houses on markets from people not being able to keep up with loan payments for various reasons. Often the only transactions taking place are foreclosures, which are cheaper because they tend to be auctioned off. Prices also can be lower because if the homeowner couldn’t keep up with the loan payments, they possibly also couldn’t afford to maintain the property.
If supply is increasing and demand stays constant, it causes prices to drop.
Home prices dropped in the Cincinnati-Middletown metro by 3.09 percent the first quarter of 2011, according to the Finance Housing Agency. In the first quarter of 2010, it dropped 3.5 percent from the year before.
New building
If existing homes are selling for less, it’s sometimes less than the cost to build a new house.
Twenty-one new building permits were issued for single-family residences in March compared to 41 March of last year, according to Butler County.
Time on market
Houses are staying on the market longer due to economic conditions. There is a housing glut with fewer buyers due to unemployment and underemployment, and it’s harder to buy a house if credit is harder to get.
Contact this reporter at (513) 705-2551 or clevingston@coxohio.com.
Source http://www.middletownjournal.com/
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