Home market slowdown leaves sellers in rough spot
When Maurice Fredette put his Nashua home on the market a year ago, he thought it would sell in about a month. That wasn’t the case. He’s had to lower the price three times, and it’s still for sale.
Fredette is not alone.
His seven-room, 2,600-square-foot colonial is one of three high-end houses in a row with “for sale” signs in front of them. None has sold.
“It’s not the building, and it’s not the lot. It’s the demand,” Fredette said of his home, which he admits he initially priced too high at $595,000. It’s now listed for $499,000.
“The market’s just gone,” said Fredette, owner of Fredette’s Tree Service. “You say, ‘What’s wrong?’ I think we just got behind the big push, and it’s happened to a lot of people.”
The problem? The housing market started slowing considerably last year, and there’s still more supply than demand, according to local real estate veterans.
“It’s now a buyer’s market,” said Rod Clermont, associate broker and former general manager of ERA Masiello in Nashua. “Instead of showing three homes, we have to show 30 homes. Sellers are competing for the available buyers, which is a healthy market.”
In the first two quarters of 2005, the most recent for which data is available, some 664 homes were sold in Nashua. That’s about half of the 1,341 sold during the same period in 2004, according to home sales statistics from the Northern New England Real Estate Network. The average selling price of a Nashua home increased by more than $10,000, from $247,023 in the first two quarters of 2004 to $257,577 for the same time last year.
In greater Nashua, 1,465 homes were sold in the first two quarters of 2005, down from 3,231 for the same two quarters in 2004.
And there’s a disturbing trend in the state’s foreclosure market. From August 2005 to February 2006, the percentage of foreclosed properties in New Hampshire that had been purchased or refinanced in the last two years jumped from 28 percent to 52 percent, according to ForeclosuresNH, a foreclosure reporting service. The service predicts the trend will continue through the end of the year.
Local real estate agents, however, say the market is already showing signs of improvement. “Inventory is up, but overall, the market is the best I have ever seen it in my 33 years in the industry,” Clermont said.
Richard Jean, owner of Central Realty in Nashua, has closed four sales since January and has a few more under agreement, he said.
“There was so much of a stall last summer right up until last month,” Jean said. “So many people waited and waited and waited.”
But with a strong economy and low interest rates, Jean has positive feelings about 2006.
“Maybe not a great year,” he said. “But a really fair year.”
Jean recently worked with a client whose three-bedroom Westgate Village townhouse on Cortez Drive took six months to sell.
“Her unit was the largest unit money could buy in Westgate,” Jean said. “It had the basement, it had the fireplace, it had the garage … and it was in a good spot in Westgate.”
While the seller wanted $225,000, Jean thought it should go on the market for $215,000. He listed it for $225,000, and got offers for $195,000 and $200,000, he said. A third offer came in for $208,900 with $6,000 back in closing costs.
The seller accepted that offer, selling her condo for $202,900 last month.
“We’re still in the instant gratification society,” Clermont said. “Buyers do not want to have to remodel, paint, carpet. If it’s in move-in, turnkey condition, you will sell quicker.”
Clermont is representing a builder of new single-family homes on North Groton Road who is offering to pick up closing costs. The homes are priced at $294,000, but the builder threw in the perk, Clermont said, to differentiate his properties from others in the area in a similar price range.
Perception vs. reality
In 2005, perceptions of the market were skewed, real estate agents say.
“Some sellers thought their houses were worth more than they were,” Central Realty’s Jean said.
Even though the market declined between 8 percent and 12 percent, consumers hadn’t agreed with or accepted that, he added. “They were under the assumption that the market was going up.”
Just the other day, Jean was helping a client who thought her multifamily house was worth $400,000.
“I came in at $330,000, and I was reaching a little bit,” he said. “So she had an independent appraisal done. It came in to the dollar of what I did.”
The market is coming down following 2005 – what Jean calls one of the most interesting years in the business. Hurricanes Katrina and Rita caused some turmoil in supply and demand, he said.
“Things started to stay on the market longer,” Jean said.
Nashua homes were on the market an average of 100 days in the first two quarters of 2005. That’s eight days longer than during the same time period in 2004.
Homes in greater Nashua were on the market an average of five days longer in the first two quarters of 2005 than the 105 days during the same period in 2004, according to the Northern New England Real Estate Network.
“A healthy market is 60 to 90 days and that’s where we are today,” ERA Masiello’s Clermont said. “Sellers would like them to sell in a week, but that’s abnormal.”
Prices also are up.
In greater Nashua, the average selling price went up to $271,332 during the first two quarters last year from $259,885 for the same time in 2004, according to the network.
“It’s a little scary when an affordable house is 250 grand and you’re really not getting much for it,” Jean said.
Condos aren’t much cheaper. The average sales price of a condo in 2005 was $205,500, up 7 percent over 2004, according to NNEREN. Condo inventory was up 26 percent.
Housing values have appreciated 72.3 percent in New Hampshire over the last five years, according to the Office of Federal Housing Enterprise.
Jean predicts prices will stay even in 2006, and demand will be slightly higher. “I think we’re going to see things stay steady for a few years now.”
The state’s tax on real estate transactions fell short of what was predicted for the second month in a row in February, a possible sign that the real estate bubble will soon burst.
“The big misconception is that there’s a bubble; there isn’t,” Clermont said.“Many inexperienced Realtors see this as a death knell, but demand and sales are still strong. Those who’ve been around the block a few times know it’s actually an opportunity.”
Foreclosures and other characteristics of markets on the downturn are actually opportunities for agents, he added.
“I made the most money of my career during the market downturn of the late 1980s all the way up to 1992 and 1993,” Clermont said. “The number of homes to sell increased drastically – at its zenith, more than a three-year supply – and a slew of agents left the business. This had the effect of leaving a healthy homes-to-agents ratio for those who stayed in the game.”
New Hampshire’s market behaves slowly, he said, and changes occur in cycles.
“We won’t see a ‘sky-is-falling’ situation,” Clermont said. “The shift will be gradual, not precipitous.” – KAREN SPILLER/THE TELEGRAPH