Local real estate market bottoms out
Upswing in sales is expected
By Greg Pearson STAFF WRITER

Page Dowdy/Chesterfield Observer Dave and Brenda Bradfield discuss selling their home in Woodlake with Re/Max Commonwealth Agent Ellen Clark.

Local experts are reporting that real estate sales are about to go on the upswing after a slowdown during the past 15 months. Much of the decline in home sales is occurring because of a comparison to an extremely strong real estate market in 2005.

As reported by the Central Virginia Multiple Listing Service (MLS), closings on new home sales in Chesterfield are off 24 percent (484 to 370) in the first quarter of 2007 compared to 2006, but the average price is up eight percent ($374,327 from $346,762). For the 12 month period ending Mar. 31, new home sales are down 20 percent, but existing homes are off just two percent (see charts on page 13). The data does not include properties sold by owners.

"We're still seeing some weakness in the market, but it will stabilize throughout this year," said Tom Tyler, residential analyst for Integra Realty Resources in Richmond.

According to Vernon McClure, president of Main Street Homes in Chesterfield, the market is already turning. In self-reported sales contracts among the area's top builders, he said signed contracts are up five percent in the first quarter of 2007 compared to last year. MLS reports closings, and McClure says there is a 6-7 month lag time between signing a contract for a new home and closing.

"It seems a lot of people who were on the fence waiting for the market to bottom out are now buying instead of waiting," added McClure.

Tyler believes the slowdown of new homes sales was caused by more cautious investors who are deciding not to buy during the preconstruction phase because they may not be able to sell at a higher price later y on. With tighter financial conditions, those who needed special financing, such as low introductory, adjustable rate mortgages or a no money down option, are not qualifying today.

builders bought fewer lots, 36 percent less in the first three months this year and 15 percent in the 12 months ending Mar. 31. The number of building permits issued is also down. That reduced the supply

of homes, which also means fewer

could be sold. Tyler said it will take g Seeing the slowdown coming, some time for builders to pick up the building pace.

He also blamed the national press for exaggerating the bad news. "The negative press doesn't translate well here because the Richmond economy is very diverse, and we don't experience down markets like northern Virginia."

According to the Virginia Association of Realtors, last March metro Richmond was the only Virginia market that showed an increase (1.4 percent) over Mar. 2006 and ranked third (with a 5.3 percent increase) out of 24 Virginia markets in the 12 month period ending Mar. 31 compared to the previous 12 months.

That Virginia Homes Sales Survey concluded that market conditions continue to favor buyers. Re/Max Commonwealth Agent Ellen Clark agrees, saying builders are offering free upgrades or a couple of mortgage-free months as incentives to buy.

"I'm telling my [resale] clients it will take a little bit longer to sell and for them to expect to get about 98 percent of the asking price," she said.

According to MLS data provided by Clark, homes selling between $250,000 and $350,000 in the past six months in Areas 52 and 53 (south of Hull Street Road) were under contract in 75 days for about $124 per square foot. Area 62 homes (between Hull Street Road and Midlothian Turnpike) were under contract for $128 per foot in 51 days while area 64 homes (north of Midlothian Turnpike) took an average of 28 days at $131 per foot.

McClure noted the average price of a lot spiked 34 percent during the first quarter this year from $73,641 to $98,597. He attributed the increase to county regulations and higher costs for development. "It just takes more time to build a house today," he said.