Increased value of home sales gives encouragement to local market
Wednesday, July 15, 2009
While new home construction in Cape Girardeau County was down through the first six months of 2009, an increase in the value of homes being sold is a sign the local market may be turning the corner.
According to the Cape County Multiple Listing Service, 102 residential listings closed from June 1 to Tuesday in Cape Girardeau and Jackson, totaling $17,204,000.
Compared to that same period in 2008 -- toward the beginning of the recession -- three more homes closed but for $14,293,000, a difference of nearly $3 million.
"Even though they're not beating the doors down, we're seeing an increase in business, especially from those who purchased higher-priced houses," said Paul Kitchen, president of the Cape Girardeau County Board of Realtors and president of Prudential Bridgeport Inc. Realtors in Cape Girardeau. "Those buyers who had been in the market for $500,000-and-up homes were burnt on their 401(k)s and were waiting on the sidelines to see what would happen.
"Hopefully this is a sign of things breaking loose quite a bit," he said. "Home sales aren't increasing at a fast rate, but we're seeing signs that someone's twisting the wheel a bit."
Through June, 494 residential units in Cape Girardeau County sold for an average of $130,775, compared to 539 units sold for an average of $135,970 during the same period in 2008, according to the Multiple Listing Service.
As of Monday, nearly 190 additional units in the county are under contract -- that is, in the final stages of being sold.
Dr. Michael Devaney, a professor of economics at Southeast Missouri State University, sees the current housing market as beneficial to the buyer.
"The increase in closings probably reflects low interest rates and greater willingness by some homeowners to accept a lower price because of extended time on market," Devaney said. "I expect housing prices to continue to decline for the rest of the year."
Meanwhile, construction is down by 10 to 15 percent in Cape Girardeau County.
Cape Girardeau and Jackson also saw a drop in the number of permits issued through June and the total value of the new homes.
In Cape Girardeau, the city issued 13 building permits through June, 11 fewer than the first six months of 2008. The value of those projects is $2,342,592, compared to $5,231,324 in 2008.
In Jackson, the city issued 15 permits through June, 10 less than during the same time period in 2008. The value of those projects is $1,843,000, compared to $4,113,500 in 2008.
Bill Cole, executive owner and broker of Realty Executives of Cape County, said the decrease in construction in Cape Girardeau and Jackson is an issue of supply and demand.
"At the end of 2008 there were plenty of new homes in inventory," Cole said. "In certain price ranges it did not make sense to build additional homes, until that inventory reduced to a more normal level."
Debbie Jennings, a broker at Re/Max Realty Experts in Cape Girardeau, said the decrease in new home construction could be because of a decrease in spec homes, houses built to predetermined specifications set by the contractor and with the idea that they will be sold once they are built.
"At times, sellers of pre-existing homes have equity and occasionally have the financial ability to deal with a buyer, whereas builders of spec homes normally do not have the equity to play with," she said.
"There can be some good buys out there, and, yes, it's a buyer's market," Jennings said. "However, that doesn't mean sellers are going to give their homes away."
Roger Arnzen, spokesman for the Cape Girardeau County assessor's office, said that while construction may be down, he sees positive signs, such as the establishment of newer subdivisions.
One of those is the Enclave at Dalhousie Golf Club. Adjacent to Dalhousie Manor clubhouse, the homes are priced at around $750,000.
The first four 3,200-square-foot homes were sold shortly after their completion in July, said golf course owner Cord Dombrowski. The next phase of four homes is set to begin construction soon.
"In this particular market we've been blessed with good success and coming up with a unique product," Dombrowski said. "You can't put a for-sale out there and hope people buy it anymore. Things are different, and we have to be more creative and take more risks."
Another subdivision that has had success on a larger scale is Jackson Ridge, where construction has increased from 15 homes in early 2008 to 40 now.
Consumer confidence and incentives are key to turning around the real estate market, Cole said.
For its part, Realty Executive of Cape County recently introduced the Executive Edge Club for its clients as another way to boost its sales. Launched this week, the club offers discounts with local vendors providing home-related services, such carpet cleaning, yard maintenance and remodeling, and personal and entertainment services, such as photography and restaurants.
"We do believe rolling out the Executive Edge Club now is particularly timely given the economic environment as a whole," Cole said. "We feel it's a win-win for our clients and for the local businesses who are participating."
Cole said another motivator for the prospective buyer is a first-time homebuyers tax credit of up to $8,000 for those who purchase a home by Dec. 1. Homes that cost $80,000 or more qualify for the $8,000 credit while homes costing less will be 10 percent of the total cost.
However, Cole said homebuyers are unable to access the $8,000 until income taxes are filed.
"One of the weaknesses in the program, in my opinion, is that you can't get your hands on the $8,000 very easily until after the purchase," Cole said. "... The end result is there are qualified buyers who do not have the necessary funds to purchase a home because they do not have the down payment."
Debra Martin of Realty Executives of Cape County echoed the thought.
"The $8,000 first-time homebuyers tax credit should have been structured for the homebuyer to use for down payment," Martin said. "Now it is an after-the-fact benefit.
"So if you don't have down payment money as a first-time homebuyer, then they can't buy," she said. "So we have defeated the purpose this money should be available for."