Realtors hoping markets rebound

Below is an article by Trevor Stokes, Staff Writer for Times Daily, in which our Regional Developer and Broker/Owner of Realty Executives Gulf Coast, was quoted. Different Brokers from around the state speak on the condition of the market in their area. Good to know. Please read...

By Trevor Stokes

Alabama real estate has been relatively sheltered from the ongoing national foreclosure and mortgage crises, but the state's housing market has slowed significantly, which has been a topic of discussion this week during the Alabama Association of Realtors convention at the Marriott Shoals Conference Center.

From January to July, home sales decreased 22 percent; during the same period in 2007, prices increased a slight 0.4 percent on average and homes stayed on the market 10 percent longer, according to the Alabama Center for Real Estate at the University of Alabama.

"We're coming out of a difficult market," said Randy McKinney, owner of Realty Executives Gulf Coast. Many condo flippers - so called because they are short-term buyers who intend to sell at an inflated price - got trapped when Hurricanes Ivan and Rita increased the area's insurance costs and when subprime mortgages adjusted and increased their rates. McKinney said that after Ivan in 2004, the condo-flipping market heated up, but after Hurricane Katrina in 2005, the market cooled down. Condo owners were stuck with mortgages worth more than the actual property. "They gambled - they lost the gamble," McKinney said.

Across the state, McKinney said that some of the best markets in Alabama are in regions associated with the military's Base Realignment and Closure Act, areas such as Huntsville, Phenix City, Dothan and Enterprise.

According to the Alabama Center for Real Estate, the Muscle Shoals region ranked first in the state's smaller markets for the greatest stability in home sales for the year to date.

"We're lacking listings; our inventory is low," said Joy Long, president of the Shoals Area Board of Realtors. Last year was slow in new construction, keeping the Shoals market stagnant.
One local trend, Long said, is homeowners who downsize from a large house to a patio home.
Unlike the Shoals, Montgomery has suffered from overconstruction.

Sandra Nickel, a real estate agency owner in Montgomery, said the state capital's market was down 14 percent over a year ago. The biggest drag is oversupply of new construction. She said that existing home sales were even from 2007. Like all real estate markets, location is key. Nickel said that in Montgomery's historic downtown pocket, supply was lower than demand, but in some outlying suburbs, the housing supply far outpaced the demand.

Statewide, the number of new construction permits in July was down 44 percent compared to July 2007, a decrease many say comes from increasing labor, materials and land costs. Closer to the Shoals, Huntsville presents a unique market because of its diversified employment pool, an influx of industrial workers and the upcoming BRAC, which is projected to bring additional residents.

"We're not so heavily tied to one industry," said Sid Pugh, a Re/Max broker in Huntsville.
Although Huntsville gained 665 jobs for a total of 197,773 from a year ago, its unemployment rate increased from 3 to 4.2 percent, according to the Alabama Department of Industrial Relations.

"What's hurting our market is people coming in from a depressed market and can't sell (their former property)," Pugh said. For example, someone who might afford a $400,000 home will instead buy a $150,000 home or may even rent a home while their former residence, in another state, stays on the market. "More people would buy in Huntsville if other markets were stronger elsewhere," Pugh said. Pugh said that a February report from Market Graphics, a market research group, indicates that if Huntsville maintained its current trajectory, the demand would outstrip supply by 2010 without factoring in BRAC. Pugh said the current overstock of houses would take one to two years to be absorbed into the market, and that sellers have begun to offer prospective buyers incentives. Interest rates remained at historic lows with the rate for a 30-year mortgage recently dipping below 6 percent. Pugh, who has worked for 30 years in real estate, said he remembered when the rate was 16.5 percent. "There's no reason why people shouldn't be buying," Pugh said, even as credit tightens as the market readjusts from loosened credit requirements.

Robert Scott, a Birmingham broker for Re/Max, said that the UAB Health System, the city's largest employer, "has been our stabilizer and our salvation. If we still relied on steel, we would be hurting." Like the Shoals market, Birmingham saw gradual and modest growth in its real estate market, Scott said, unlike other areas that saw unsustainable booms.

Trevor Stokes can be reached at 740-5728 or trevor.stokes@TimesDaily.com.