Seller beware: It’s a buyer’s market, not a seller’s, and not a builder’s
Elizabeth Barnes is “wiped out.”
“We priced it right, too,” said Barnes, talking about her 325 Lee Drive, Waynesboro, home, that she put on the market in July 2008 at a list price of $275,000, $40,000 below what she was going to list it at a year earlier when she had flirted with the idea of moving then.
“People have had kind of augmented expectations of what their houses are worth. We’ve had these huge increases every year, and it’s just not happening anymore. What used to be reasonable was about 5 percent a year, and then people got these unrealistic expectations. So we were careful. And … nothing,” said Barnes, who was “wiped out” when she gambled and bought her new home before the Lee Drive home sold, and a home in Norfolk from a previous marriage lost its renter, and she suddenly had three mortgages to carry basically on the income of herself and her husband.
“It truly wiped us out. It wiped out our savings. We have nothing. We’re macaroni-and-cheese out of the box. No new clothes, no going out to eat, no vacations. I mean, really, it’s that tight,” Barnes said, and she’s not alone in having this experience, according to my cursory look at the local market.
Barnes is renting the Lee Drive home right now to get at least some income from it. Connie Lee is doing the same with her home at 1235 Chatham Road in Waynesboro that also went on the market last July. “I had a few people look, but no offers,” said Lee, who like Barnes rolled the dice and bought a new home on Governors Lane in Waynesboro before her first home had sold.
Lyle and Erin Camblos are in a similar situation. Their 508 Chestnut Ave., Waynesboro, home hasn’t sold yet, and they are due to move into a new home that they had built in Crozet in the coming weeks. “When we made decision to start building, the market wasn’t what it is,” Lyle Camblos said. “We’re now just getting to the end of that build, and the house is going to be ready to move into in a couple of months. We really don’t have a lot of choice now.”
On the other side of the ledger, it really is a buyers’ market out there right now, as long as you’re a buyer with immaculate credit, anyway. First-time homebuyer Steven Sisson found that out during a recent home search that netted him his home on the 600 block of Oak Avenue in Waynesboro for $271,000 at a price lower than what the home has been assessed for.
“I knew that prices had dropped anywhere from 17 to 20 percent in the market, and I knew it was a buyers’ market,” said Sisson, who had made an offer on another house in the Tree Streets in Waynesboro where the owner “came down a little, but not to my price” prior to making the offer on his Oak Avenue home.
Sisson’s real-estate agent, Keri Wilfong with Augusta Realty, sees the activity from buyers picking up across the board as a good sign of where the market is headed. “The phones are starting to pick up here at the office. We’re starting to see more activity,” Wilfong said. “I think we’ve kind of bottomed out, and we’re starting to turn a corner a little bit. But it’s going to take a while. Everybody has to be patient. It’s not going to happen overnight.”
And therein lies the rub. Markets can take a while to correct, and in the meantime Liz Barnes is eating mac-and-cheese out of the box, and local developer Tommy Shields is having to get creative to keep his work crews together. “We’ve had to cut our overhead and try to operate as leanly and efficiently as we can. And as opposed to building new houses, we’ve had to pick up remodeling work and some commercial renovations and different type of work just to keep our guys busy,” Shields said. “I haven’t had to have many significant layoffs, but we’ve worked shorter weeks and diversified into things that may not be quite as profitable, but we’ve been able to maintain.”
That’s really all builders in this bear market for real estate can do. The buildup in the real-estate boom of the early and middle parts of this ’00 decade was focused on high-end housing, the hated-in-popular-lore McMansions that in the Valley go for $300,000 and $400,000 and more. Dave Milstead of Milstead Construction in Harrisonburg blames builders and local-government leaders blinded by big dollar signs for the glut of overpriced housing that has driven the market down, and thinks the next buildup will have to be based on a foundation of more sensibly priced homes that middle-class families can be expected to be able to afford.
“If it’s two-twenty-five or under, and the closer to two hundred you are, the stuff is still moving. The ones that aren’t moving are three hundred, three-fifty, three-seventy-five. You can look in Waynesboro, you can look in Staunton, Harrisonburg. That’s where people are in trouble,” Milstead said.
“Now’s the time to build, now’s the time to borrow money. If you keep your price under $200,000, you’re going to move product. If you check the market, who’s doing it?” Milstead said.
Shields agrees on that point. “The more affordable housing will recover first. In our area, maybe the two hundred and under has held pretty steady. Instead of three hundred and four hundred thousand dollar sales, you’re seeing a lot more activity at the lower end of the spectrum,” Shields said.
The veteran builder is concerned, though, that Washington might not have done enough to try to spur demand both in the area of tax-credits legislation that the homebuilding industry wanted to see more expansive than it ended up being and in the bank bailout that has pumped hundreds of billions of dollars into banks across the country that seem more interested in using the tax dollars to boost their assets ratios than to loan them back out into the economy.
“Money is so tight, it’s unbelievable. I’ve never seen it like this. I’ve been in business 44 years, and I’ve never seen credit this tight,” Shields said. “Interest rates are good. It’s still a great time to buy. It’s a great time to build. Subcontractors and suppliers have come in line. We’ve just got to get the demand part and the activity levels up. Once we can stem the tide from foreclosures and get the market moving positively, that will help housing recover quicker.”
Jim Duncan, a real-estate agent in Albemarle County and author of the popular real-estate blogs realcentralva.com, realcrozet.com and realwaynesboro.com, has looked at the numbers and decided to take a more cautious approach to talking about the recovery that is to come down the road. First and foremost, Duncan tells his clients, “You need to look at houses as homes again.”
“The data part is something that I am really, really high on, but you’ve got to looking at being able to raise kids and live somewhere, and you’ve got to be able to recognize that there is some intrinsic value to that,” Duncan said. “But it’s hard to get people to say, This is a new construction development, there’s nobody around me, it’s barren, I know we’re going to be able to walk to something some day soon when this is developed out, should I pull the trigger? Getting people to recognize that is hard.”
It’s not that Duncan is all bearish, all the time. He looks into his crystal ball and sees recovery six to nine months into the future, basically the end of calendar-year 2008 and the first quarter of 2009. “There’s a lot more buyer activity now,” Duncan said. “When I talk to agents, buyers, sellers, there’s more buyer traffic. Open houses, the traffic is up, way up. Showings are up significantly. I really think people want to buy. As much as I have disdain for the term pent-up demand, I think it’s legitimate. I try not to put myself out there as a shill for Realtors. It’s a great time to buy! It’s always a great time to buy or sell! But I sense it, that there is something really starting to churn in the market. So if you were to buy now, I really think and hope you will look back in five years and say, That was a good decision.”
And that’s the silver lining. Because it is a good time to buy. Even Elizabeth Barnes with her horror story can attest to that.
“We had looked at the house we’re in now a year before when we were just thinking of moving. It was on the market then for three-ten. When we looked at it again a year later, it was two-thirty. We got a great house for less than what we had over in Pelham,” Barnes said.
“The upside is it’s a great time to buy a house,” Barnes said.
– Story by Chris Graham