| Housing crisis changes local real estate market |
By: Clare Kennedy
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Posted: Saturday, November 29, 2008 9:26 pm
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OWATONNA — When Monica and Bob Recktenwald went house hunting in Owatonna they had plenty of properties to choose from.
The couple, who recently relocated from Pennsylvania, reviewed 20 properties in a single day during their search, and there is more where those came from.
As the housing crisis grinds on nationally, the number of single family homes on the market locally remains uncomfortably high, from a seller’s perspective. In a normal year, there are 150 to 160 houses on the market here, said Barry Gillespie, president of ERA Gillespie Real Estate. In October, there were 213 active listings. This month, that number has fallen slightly, to about 200.
The culprit, Gillespie said, is a familiar, 11-letter word: Foreclosure.
Interestingly, houses in foreclosure sell fairly quickly, Gillespie said, because potential buyers sense opportunity long before the house goes on the market, and usually the price is right.
“It’s a lot of work for the listing agent, but they’re not hard to sell,” Gillespie said. “A lot of times the buyer has been watching the house, looking at the legal ads.”
The problem is the sheer number of foreclosures out there glutting the market, with a supply that outpaces demand.
“For every foreclosure, we have there’s another in redemption,” Gillespie said. “That means there is going to be a foreclosure to replace the foreclosure.”
The glut of foreclosure has had a wide-reaching effect on the entire housing market, even houses that fall into the $150,000 to $200,000 range.
For one thing, it breaks the buying-and-selling cycle.
“With the sale of a foreclosure that bank isn’t going to buy another house, whereas if a regular Joe were selling his house, he would go out and buy a more expensive home,” Gillespie explained.
The foreclosed properties also drag general market values down, as banks slash the list price, which makes it difficult for private sellers to compete, Gillespie said. The average sales price has fallen 5 percent, Gillespie said.
As the foreclosure crisis has progressed the bottom end of the market has gotten lower and lower. Before this crisis began, it was rare to find a house with a list price under $100,000, said Century 21 Owner and Broker Bob Hansen.
“You might find some right around the low 90s, but that would be a real fixer-upper, something that needed work,” Hansen said.
As of Saturday afternoon, the cheapest house in Owatonna was listed at $47,500, according to the Multiple Listing Service. The house, which sits at the corner of South Elm and University, has been boarded up since late summer.
In the wake of the crisis, the buyers have changed as well. Hansen said he has seen a lot of first-time home buyers, encouraged by the low prices.
“We’re still getting investors, but they aren’t flipping them,” Hansen said. “They’re fixing them up as rental property.”
However, financing is not as free and easy as it was in the past.
“It is still possible to buy at zero down,” Gillespie said. “People can still get in without a big outlay. But never before has it been so important to have good credit. That eliminates some of the buying market.”
Buyer Bob Recktenwald agreed. The Recktenwalds move frequently and have bought eight houses during their married life.
“People are taking a harder look at what they’re willing to spend and banks are taking a harder look at what they’re willing to lend,” Bob Recktenwald said. “Now you almost have to have 20 percent down. In the past, you may have had to put in 5 percent.”
Of seven homes sold in Owatonna the past two weeks, four were paid for with 10 percent to 20 percent down, according to documents provided by the Steele County Auditor’s Office. Of the remaining three, only one house sold with zero down.
The upshot? While the housing market is still sluggish, for those well placed to purchase, the time is right. The Recktenwalds settled on a five-bedroom in a nice neighborhood in north Owatonna — to the tune of $205,000.
Now their challenge is to sell their old house in rural Pennsylvania.
Clare Kennedy can be reached at 444-2376. |
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