The National Association of Realtors (NAR) has released statistics indicating that existing home sales for the Central Kentucky region fell 4.74 percent in January 2008 vs. January 2007. The NAR reported a drop of 23.5 percent for the U.S.
Locally, the median sales price for the Central Kentucky region dropped 2.34 percent in January 2008 vs. January 2007 while the U.S. saw a drop of 4.6 percent. †
Judy Craft is president of the Lexington Bluegrass Association of Realtors and principal broker of Milestone Realty Consultant in Lexington. She recently met with Business Lexington's Tom Martin to discuss the local real estate market. The following is a portion of that conversation, you can hear the entire interview by listening to the podcast below.
TM: Judy, has the Lexington real estate market been "bubble free" relative to many of the nation's real estate markets in recent years?
JC: Absolutely. The Lexington market did not experience dramatic rises in prices over the past few years, as did places like San Diego, Washington D.C. and Nevada for example. When Lexington's home price growth over the past years is compared to the U.S.'s, and for instance, Washington D.C.'s, you can see that here home price growth is steady and its fluctuations are not large and did not wildly rise in 2005 like the national or D. C.'s figures did.
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TM: According to one resource that's used in the media, the California firm RealtyTrac, foreclosures in our area are up 121 percent for 2007, which sounds like a lot. How does that compare with the country?
JC: Well, and Tom, you know, if I can be frank with you, that is one source of frustration for us in the real estate industry, because things aren't bad here. And when we talk about the foreclosure rate being up 121 percent for 2007, in 2006 there were only 210 homes facing foreclosure, and in 2007 there were 464. Now if you are reading that headline you're going to think, "Oh my goodness, everything is crashing down around us!" Well, it's not true. People need to read the body of the article, and we feel the media needs to not be so alarmist in their headlines. I know they are trying to grab people's attention, and it does grab people's attention, but often in a way that it shouldn't. Because it does discourage people from buying homes in a market that is perfect for the home buyer.
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TM: Home owner-ship rates have been at an all-time high, and now we are seeing from this subprime fiasco that a lot of that was the result of over- confidence, perhaps a little bit of overexuberance, overreaching, on the part of buyers who were in reality not in positions to assume these credit burdens. Are first-time home buyers in Lexington still able to enter the market, and are they entering it as quickly as they were last year or even five years ago?
JC: Well, actually they are not. But I want to point out, Tom, that we haven't been affected by the sub prime market very much at all. For whatever reason, I believe in the state of Kentucky the number of loans that were made on the sub prime - they are called Alt A, which are no document loans - were less than 6 percent. So we have had most of our folks that have done the conventional, FHA or VA-type financing. So we're not seeing as many of the sub prime, where the arms are jumping up to 12, 14 and 16 percent, as other parts of the country.†
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TM: Have you seen any changes in the number of days units are staying on the market before they sell?
JC: Yes, Tom. In 2006, the average days on market was 57. In 2007, we are looking at about 70 days, which is a rise of about 23 percent, and a lot of that is due to increased inventory.
TM: And how about average home prices? How are they faring?
JC: Well our average sales price in 2006 was $192,450. In 2007, $191,975, so we are very stable. The median sales price in 2006 was $157,500, 2000 was $158,427, rising about one percent. And just for your information, when you compare December 2006 to December 2007, this number rose 5 percent.
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TM: We've seen the building permits have been down recently. How is the new housing market looking?
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JC: Well, the Lexington Bluegrass Association of Realtors doesn't track new home permits. But according to the Market's Edge, which is put out by Dale Adkins in Tennessee, there was a 22.2 percent drop in building permits in 2007 versus 2006. We had Dr. Lawrence Yun, who is the chief economist for NAR (National Association of Realtors) come and speak to us in November, and he feels like, and I agree with him, that it's a necessary discipline that has caused the builders to go out and take out fewer permits. We do have inventory out there right now that needs to be sold before more building starts. But I would not in any way say we are in a crisis situation in Central Kentucky.
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TM: Do you feel that we are overbuilt in this market?
JC: I don't know that I would say that we are overbuilt. Obviously, the saturation point is different than it has been in the past. You know, we couldn't build them fast enough. In 2006, we had about 1,491 sales in new construction. In 2007, we had 1,161, which is a drop of about 22 percent.†But again, that's not bad, and again, the building permit decline is necessary.†
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TM: Taken over the long term, how cyclical are these things?
JC: Very much so. When I first started in real estate, which was a few years ago, 1985, my then-broker told me that it really ran on about six-year cycles. And I don't know if the number of years is true, but I have found that the ebb and flow just happens; it's the way the business is.
TM: There is a lot of focus right now in what's happening with infill within the Urban Services Boundary, and in particular within the downtown sector. How are things looking there? Downtown versus suburbs, versus exurbs, as they are called - the outlying area?
JC: Well, in the downtown, we have seen the percent change in properties, they are not properties but units; there's an 80 percent increase. And in Fayette County as a whole, there's about a 10 percent decrease, but as we all know, the big Downtown Revitalization Project has been going for, I think, about three years now with a very strong downtown task force that's driving that. A lot of builders are going down there and developers. So it's kind of an unusual situation.†
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TM: Do you think that the real estate community is excited about it?
JC: I think the real estate community is very excited about it. It's just a new avenue for us. I think the downtown needs revitalization. Everybody loves to go downtown. One big thing obviously is the parking. Now this is Lexington; we don't want to have to walk more than 10 steps to get where we are going. But as we begin to see more properties grow and stores and just things to do downtown, I really feel like it's going to become a very vibrant part of our community.
TM: Are you seeing people downsizing from larger homes to smaller spaces?
JC: Well, we don't track that. Our single level, which would be a ranch-style home, actually decreased in 2007 by about 10 percent. But a lot of the so-called baby boomers don't necessarily want one level. There are a lot of townhomes and homes out there that are one-and-a-half or two stories, but they have a first floor master. There are a couple communities where that's the way the boomers really want it, because they want to have the grandkids come and the kids, but they'd like to have them upstairs while they are downstairs, which is certainly understandable. So they don't mind a few steps.†
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TM: Is it taking longer right now to move some of the market's more expensive properties?
JC: Yes, it is. When you're looking at the price range of $750,000 to $1 million, we have about a 47.5-month supply of inventory available. At the same time in 2006, it was about a 43-month inventory, so slightly longer.
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TM: What are the concerns of the real estate industry here for Lexington and then for market's future?
JC: Well, Tom, right now there are buyers on the sidelines who are listening to the national headlines and are waiting out a housing bubble. They're also seeing locally sensational headlines, which really don't focus on the real story, just the attention-getting numbers like we talked about before. But because of the prevalence in fear generated by so many of the media reports on a national real estate crisis, many are thinking that they should wait a little bit longer to buy or sell, that they want to wait out the housing bubble. And the facts that our data shows is there is no evidence of a housing bubble in our market, and it's an excellent time to buy because of stable prices and unprecedented selection. I feel as if the consumers have been given the wrong information for Central Kentucky where the headlines scream "Don't buy, don't buy, don't buy!" I say it's a great time to buy, because if you have a good job and you have access to good financing and are willing to provide a little bit more documentation than has been expected in the past, it's a great time. You can get a great fixed loan for 6 percent or under. And the inventory is out there.