Spring is always good for real estate, and especially so in southern New Jersey.
The seasonal improvement in the mainland real estate market this year, however, will be modest – the mere beginning of the climb out of the three-year housing slump.
Realtors are guardedly hopeful home prices have quit falling and will begin to rise a bit, and that buyers will be lured into the market by record inventory levels and low interest rates that can only go higher (and maybe soon).
“I don’t really see a strong spring,” said William Wagner, broker owner of Keller Williams Realty Atlantic Shore, a Northfield agency with 117 agents. “Right now it looks like we’ll see a slight increase.”
The most hopeful sign, he said, was the 26 percent increase in properties under contract in mainland Atlantic County in February from the year before. Even that, though, was largely due to much better weather.
The outlook seems a little brighter in mainland Cape May County, where sales have been steady and prices have bumped up a bit, said Candi Ludlam, broker associate and sales manager for Century 21 Cape Shore Realty Co. in North Cape May.
“The market appears to be stabilizing and property values are increasing,” she said. “Things are picking up. We see more walk-ins, the phones are ringing more. I’m optimistic we’ll have a much better year this year.”
Larry DePalma, broker owner of ERA DePalma Realty Co. in Millville, said he’s seen a small increase in traffic, even though most are still first-time buyers.
“I’m starting to see some investors calling about things, looking to see what’s out there anyway,” he said.
They’re drawn by properties whose prices are back to 2003 levels, hardly above the value of the land, he said.
“I think when spring hits and the weather breaks, we’re going to see a little flurry of activity,” DePalma said.
The mainland real estate market in Atlantic County hasn’t fared as well as the island communities in the housing slump.
The median price of mainland single-family homes sold in February fell 14 percent from the year before to $176,000, market data broken out for Keller Williams by Terradatum shows. For the county as a whole, including the better-performing islands, the median price fell just 8 percent to $198,000.
Other market measures show similar
relative weakness in the mainland market vs. Atlantic County as a whole:
_February 2011 single-family sales: Mainland down 10 percent to 61; countywide down 7 percent to 87;
_Homes on the market in February: Mainland up 10 percent to 2,045; countywide up 7 percent to 3,193;
_Average days home is on the market: Mainland up 14 percent to 128 days; countywide up 12 percent to 131 days.
The home price drop reflects lower earnings, high unemployment and the outmigration of those seeking work elsewhere, Wagner said.
“The price has to do with what people can qualify to buy,” he said. “Toke rates have dropped dramatically, and a dealer who used to make $42,000 is now at $27,000 to $32,000, so they qualify for way less money.”
Demand for homes is falling further behind supply, he said. The number of mainland properties whose listings expired in February without a sale was 132, up 31 percent from the year before.
Properties for sale in mainland Atlantic County, meanwhile, increased 10 percent from the year before to 2,045. And a third are distressed properties that drag down prices.
“Last February, 13 percent of properties were bank-owned, and this February, 29 percent are bank-owned,” Wagner said. “That’s the competition out there.”
Stability on Cape
Candi Ludlam tracked home sales from Cape May to Dennisville in Cape May County, excluding the barrier island communities.
She found for the year ending in March, 454 properties sold for an average price of $157,162 – an increase of 1 percent over the average price for the year before.
“With that little increase, it suggests property values are increasing,” Ludlam said.
Sales were slightly up from the 451 in the prior year, and a bit down from the 460 in the year ending March 2009.
The mainland Cape May County market seems to have stabilized, but remains very much a buyer’s market, with 792 active listings, she said.
Most buyers are aware that mortgage interest rates are below 5 percent, but many helpful programs, especially for first-time buyers, remain unknown, she said.
Ludlam said a recent buyer using a U.S. Department of Agriculture program shows how lucrative the help can be.
“She was renting for $1,050 a month, and now she’s paying $760 a month including mortgage principal, interest, taxes and insurance,” Ludlam said. “She maybe had $600 out of pocket to get into the program.”
New deal on new
Home construction plunged even more than sales of existing homes in the severe recession, and developers on the mainland have responded with lower prices and new entry-level models.
Federal figures show U.S. housing starts in February at an annual rate of 479,000, which is 22 percent lower than the prior month and down 20 percent from the previous year. Five years ago, before the real estate bubble burst, housing starts were running at 2.1 million a year. New home sales fell in February to an annual rate of 250,000, the lowest in records going back to 1963.
Joseph Gurwicz, owner of Gurwicz Signature Properties in Egg Harbor Township, said that to survive in a market where other developers have failed, he’s had to go up against existing homes.
“I’m fighting the resale market. I have price points (from $199,900) at which I can compete with a used home,” said Gurwicz, who lives at one of his communities, Harbor Pines Golf Club & Estates. “I can give them a new home in that same dollar point, so why buy used when they can buy new with warranties and all the bells and whistles?”
Even so, Gurwicz has seen no steady improvement from what he believes is the market bottom. His other developments include Eagles Glen and a townhome development, London Court II.
“I see no steady stream either up or down. One week we’re getting traffic, and another week we’re looking at the walls and saying, what’s going on here,” he said.
Mary Riddle, spokeswoman for Fernmoor Homes’ Wood’s Landing age-restricted development in Mays Landing, said the company is introducing a new entry level 1,500 square foot home at $233,900.
“The price point is important, and people are looking at that,” said Riddle, of Ventnor. “There is a lot of interest, but also a lot of hesitation.
Much of the hesitation these days comes from worry that a buyer’s existing house won’t sell, she said, so Fernmoor has a program to address that called Smooth Move to help people accomplish the sale. Other Fernmoor developments include Crystal Lakes and Crystal Meadows, both in Egg Harbor Township.
Cindy Lombardo, spokeswoman for K. Hovnanian’s Four Seasons at Harbor Bay age-restricted homes in Little Egg Harbor Township, described traffic there as slow and steady.
“Things are looking up. We have six deposits, and that’s pretty good,” she said. “We had nine new people and two returns the past week. As soon as the weather gets nice it will get better.”
Four Seasons homes range up to 3,000 square feet and the developer is building a community clubhouse of 16,000 square feet.
Condos challenged
The condominium market on the mainland faces the same tight-credit financing difficulties as single-family homes but with one extra challenge: the loss of Federal Housing Administration money for most.
“For lenders, FHA is now the primary source of financing,” said Wagner of Keller Williams. “If a condo association has more than 15 percent of its owners delinquent in the payment of condo fees, the FHA won’t fund a loan to buy a condo there.”
He said that’s the case at a lot of condo developments, and so although his agency has buyers for condos, it can’t get financing for them.
The median price of a mainland Atlantic County condo sold in February dropped 22 percent from the year before to $109,000, Terradatum figures show. Just 16 condos sold, same as the month before but up from nine in last year’s snowy February. Average days on the market jumped to 160 from 118 a year ago.
Strong recovery elusive
Wagner’s Keller Williams Realty Atlantic Shore has done surprisingly well despite the slow market, putting 50 homes under contract in February – nearly double January’s sales, which in turn had doubled December’s.
But that doesn’t make Wagner optimistic that anything more than a slight improvement will be felt this year.
“Based on what we’re seeing, we’ve got a long way to go,” he said.
Continuing layoffs at casinos and public agencies are offsetting construction hiring by the gaming industry, and government subsidies to keep interest rates low may not last, reducing buying power, he said.
“If rates go up, prices will fall further,” he said. “For every 1 percent increase we could see another 10 percent decrease in the sales price.”
Gurwicz said his third-generation development firm is still seeing more negatives than positives for home builders. Banks, for example, have made it much harder for buyers to qualify for a mortgage.
“We just need to get confidence back a bit. The economy needs a little confidence builder, something that makes people feel more comfortable,” he said. “Banks have to loosen up a bit and as people get confident, things will start moving.”
Wagner said he hopes that happens, and properties start selling consistently this year.
But for housing, the outlook remains uncertain, so this might not be its year.
“We could be looking at an extended period of recovery, maybe two or three years,” he said.
Contact Kevin Post:
609-272-7250
KPost@pressofac.com
