Job market dictates real estate market

Published 10:38 pm Friday, July 15, 2011

by Billy Sutton

Lately property owners and prospective buyers want to know the answer to three basic questions.

How is the market now? Are property prices still falling? And, are things going to get any better?

In the Southampton-Franklin market, the number of units sold fell from a high of 274 in 2005 to a low of 151 in 2009. There was a slight increase in the number of units sold in 2010, but the average sale price of a home fell another 5.17 percent.

In 2000, the average sale price of a home was $103,013. The average rose to a high of $189,869 in 2007 and fell to $157,063 for 2010.

In the first six months of 2011, the median home sale price dropped to $123,338, or 19.31 percent lower than the same period in 2010. In the first six months of 2010, homes sales under $100,000 made up 28.57 percent of total sales.

In 2011 that number rose to 41.84 percent.

Days-on-market remained at 142 in 2011, and the number of homes available for sale fell in 2011 by 23.77 percent.

Even so, the market remained favorable for potential buyers (especially if you have money for a down payment).

Interest rates are at record-low levels, but some lenders are requiring more in down payments — some as high as 20 percent of the purchase price, depending on the property and subject to an appraisal.

The two primary factors affecting the local real estate market are jobs and the large number of foreclosures of real estate-owned or lender-owned properties.

Freddie Mac’s Market Outlook released on May 11 describes the outlook as “dampened by extended unemployment.” Locally, the area is still coming to grips with the effects of International Paper’s closure of the Franklin mill in 2010 and the ripple effect on supporting businesses.

Recent announcements that part of the Franklin mill will be repurposed, adding 213 jobs, will provide a much-needed shot in the arm for the local economy. It is too early to tell what effect this will have on the local housing market.

The Real Estate Information Network, which operates the local Multiple Listing Service, reported that 22 percent of all listings in the MLS system are foreclosures and short sales.

The number of foreclosures rose from 3.71 percent in 2001 to a high of 26.29 percent at the end of 2010 without short sales.

Foreclosures are down, at 16.67 percent, for the first six months of 2011 compared to 23.50 percent in the first six months of 2010.

April, May and June 2011 was the first time the foreclosure rate was been below 15 percent in 19 months. April 2011 was 10.87 percent, May 11.36 percent and June 14.29 percent.

The National Association of Realtors released data on May 10 showing that distressed properties — including bank-owned homes and pre-foreclosure short sales — make up 39 percent of the first quarter’s existing home sales. That’s up from 36 percent a year earlier nationally.

Recently released figures for March 2010 put the number of foreclosures nationwide for March at 2.2 million, with another 6.33 million in pre-foreclosure.

The Southampton-Franklin real estate market will continue to experience declining real estate values, due to the job market and large number of foreclosures. The market will improve when the job market improves and the supply of foreclosures is significantly reduced.