Local Real Estate Market Buoyed By Tax Credits

By Nancy K. Crevier

“Hopefully, we have been through the worst,” said Anne Stark, president of the Newtown Board of Realtors, Thursday, January 21. She is upbeat despite statistics that show the average days on the market for a single family home in Newtown rose slightly in 2009 from the previous year, the number of single-family dwellings sold dropped from 228 to 212, listing prices sank seven percent, and average sales prices went down ten percent, from $505,000 in 2008 to $457,000 in 2009.

Zillow, an online real estate property appraisal database, lists slightly lower numbers for the Newtown/Sandy Hook area, with single home value index dropping from $411,000 in February of 2009 to $392,500 in November. The home value index indicates that half of the estimates were above that number, half below the number.

“This is not necessarily a bad thing,” said Ms Stark. “Right now real estate agents in town are extremely active. We have had lots of activity with first-time and ‘move-up’ buyers, even during the Christmas holidays,” she said. The extension of the first-time buyer tax credit and the addition of a tax credit for those wishing to move up is the catalyst behind the recent burst of activity. “People who want to take advantage of the tax credits will need a contract by April 30 with a closing by June 30, so they are busy looking now,” she explained. It is the government efforts through the credit programs that has been one of the most positive developments in the last several months, Ms Stark said.

The $8,000 first-time buyer federal tax credit is available to people who have never owned a home before, or who have not owned one for three years. The $6,500 repeat buyer tax credit is for homeowners who have lived in their present home for five of the last eight years, and who will make their new property the principal residence.

For those with a good credit score, said Ms Stark, the tax credits combined with mortgage rates that have stayed at or below five percent mean that this is a good time to buy. “Mortgages are still very available. And in Newtown, FHA mortgages are available with a three and a half percent down payment,” she said. FHA mortgages are not as attractive in surrounding towns, she added, and anyone with a credit score at or above 580 can be part of the FHA program. The mortgage process itself is a little tighter now than in the recent past. “You might find that the lender has more requirements,” Ms Stark said, such as requesting two, rather than the traditional single appraisal, both at the buyer’s cost.

Agents are seeing sales in all price ranges the past six months, with most sales falling between $250,000 and $550,000. Most likely to sell are those homes in pristine condition, and those that are priced with a compelling price. Competitive pricing is no longer enough, emphasized Ms Stark.

This year is also seeing a return to “a much more normal inventory of homes, about a six-month supply. Previous to this, we had an inventory of 12 to 13 months worth of homes,” Ms Stark said.

The drop in inventory is due mainly to two factors, she said. Homeowners who had a home for sale in the fall may have taken it off for the holidays and not yet returned it to the market; or people who had put their homes on the market to see if they could get what they wanted found that the houses were not priced to sell and took them off for now. Fewer homes on the market means that the inventory more closely matches the number of potential buyers.

What would really turn the real estate market around is more jobs, Ms Stark said. When jobs are plentiful, people are moving up and buying new homes. “Unemployment causes people who would normally move up to not move up, or to lose homes. We’re still not experiencing so many people feeling positive enough [about the economy and job security] to move up,” she said.

Realty Trac, a database of foreclosure and bank-owned properties, listed 33 homes in Newtown/Sandy Hook in preforeclosure in mid-January, a number that Ms Stark said is fairly accurate.

The handling of bank-owned, foreclosed, and short sale homes has added a whole new dimension to the business of real estate in Newtown, said the experienced broker. “Two years ago, we had no such category as foreclosures,” said Ms Stark. This year, a category has been added in the MLS (Multiple Listing Service) to help potential buyers identify if a home is bank-owned. As of January 21, six of the 169 active listings were bank-owned properties, and 12 were short sale properties. “A short sale property is one in which the owner paid more or owes more than the market value,” Ms Stark explained. “The bank makes an agreement with the seller as to what will be an acceptable offer.”

Homes that are bank-owned or that are short sales may be bargain-priced, but Ms Stark cautioned that it can mean a more difficult sale. “It takes longer to get bank approval. The buyer has to be extremely flexible and willing to wait,” she said. For buyers desiring to take advantage of either of the federal tax credits, short sale or bank-owned properties may not work out, due to time constraints.

Real estate agents have had to be flexible, as well, in what Ms Stark called “a different environment with different challenges than we’ve had to deal with before.”

Low sales and low sale prices have meant agents are working doubly hard, and sales involving a short sale or bank-owned property are more difficult to bring to fruition. “A lot of agents have learned to change their niche to the short sale/foreclosure market, but that means a lower commission and a tremendous effort for those agents.” Real estate agents are also finding it necessary to hone already finely tuned people skills as they guide sellers and buyers through troublesome transactions.

“There are always going to be people who need to buy or sell a home, though,” Ms Stark said. “I am absolutely feeling positive about the real estate market in Newtown this year. Traditionally, real estate is a cyclical business and this is just part of the cycle. This will come back.”