More than five times as many homes are for sale in Hampton Roads now as were on the market during the heady days of the real estate boom in 2004, and the excess inventory is showing no sign of shrinking anytime soon.
"The calls - they've just stopped coming in," said Bob Bristol, a Chesapeake mortgage broker who described the market today as "the slowest I've ever seen" in 15 years in the business.
As 2007 winds down, an estimated 23,500 existing single-family, detached homes are unsold in greater Hampton Roads, from the Peninsula to northeast North Carolina, according to the Real Estate Information Network Inc. and the Old Dominion University Economic Forecasting Project.
In 2000, the inventory of unsold homes was 8,475. It dropped steadily to a low of 3,480 in 2003 but has been growing rapidly ever since.
Sean Kentch, a Navy officer who moved his family from Hawaii to Chesapeake at the height of the housing frenzy, has experienced what a difference a few years can make.
In September 2005, Kentch paid $538,000 for a five-bedroom, 3,800-square-foot brick home in the new Ravenna subdivision, near the intersection of Mount Pleasant Road and Centerville Turnpike.
Late last year, he learned he would soon be reassigned to Fort Worth, Texas. This fall, he put the house up for sale, asking $579,000. He didn't get a single offer.
Finally, Kentch decided to rent it instead. Within a week, he had a tenant, though the rental income will cover only about two-thirds of the $3,000-plus-a-month mortgage.
Between February and mid-October of this year, 13 of the 15 homes sold in Kentch's subdivision went for less than the assessed value; all but two of the 15 homes were sold by builders, according to city real estate records.
In North Shore at Ridgely Manor, an upscale development in Virginia Beach with 109 platted lots, only 20 homes have been built, with 11 more under construction, according to the Virginia Beach real estate assessor's office.
Records show that 78 lots remain vacant and there have been only seven actual sales - two for less than the assessed value.
Tina Merritt, a Realtor with Long & Foster in Virginia Beach, attributes much of what's going on in the local market to a correction, specifically in the form of a "recovery" of the region's housing inventory, which shrank to very low levels a few years ago.
Acknowledging that demand for homes priced in the $500,000 to $700,000 range is soft now, Merritt said she's having little trouble closing deals on properties in the $150,000 to $300,000 range.
Gilbert R. Yochum, who directs ODU's Economic Forecasting Project and tracks local housing trends, estimates that the supply of existing homes on the market has reached 10,000 to 15,000 beyond what would typically be needed to meet demand.
While housing inventory is growing regionwide, sales are falling.
Sales of existing homes dropped by 20 percent - to an estimated 24,066 this year from 30,173 in 2004, according to the Virginia Association of Realtors and ODU.
So far, though, the excess supply and weak demand have had little effect on prices. Year-to-date through November, the median sale price of an existing single-family home in the region rose by 4.2 percent compared with the same period in 2006, according to data from the Real Estate Information Network and ODU's Economic Forecasting Project.
This suggests that home sellers are holding out for the best offer, Yochum said.
That's not the case with new homes, however. In the same period, the median sale price for a new, single-family home in the area fell by 4.1 percent.
"In Hampton Roads, builders have shown a willingness to lower their selling prices," Yochum said.
Rusty Sykes is owner of Chesapeake-based Prosperity Building Company, which builds upscale homes in developments such as Edinburgh. He said he has reduced prices on some new homes he's been trying to sell, with help from subcontractors.
When each of 30 or so subcontractors working on a home takes a $500 to $600 pay cut, the savings become significant, he said.
Sykes said prices of home lots also have started to come down. While a typical lot in a new development in Great Bridge would go for $220,000 a couple of years ago, the same lot today is selling for $175,000 to $180,000, he said.
In the last week of November, 1,359 new single-family, detached homes were for sale in Chesapeake, Norfolk, Portsmouth, Suffolk and Virginia Beach, with an average asking price of $470,498, according to Bill Dore, a Hampton Roads housing market analyst, citing Real Estate Information Network data.
From January through October, 1,251 new homes had been sold in the five cities, at an average price of $397,650.
The average number of days on the market for new homes that sold this year was 78. Last year, new homes sold in the five cities were on the market for an average of 60 days, and in 2004 for an average of 42 days, according to Dore's analysis.
Dore said the run-up in home values between 2003 and 2006 led many to see what they wanted to see.
"We got sloppy," he said. "We took those three years as a trend, instead of an aberration."
The "trend," however, was actually a market blip driven by the notion that land for development was disappearing rapidly, along with available housing, Dore said.
Though the prevalence of so-called "subprime" mortgages in Hampton Roads is not believed to be as big a problem as in other parts of the country, there has been a ripple effect locally as national lenders have tightened their standards considerably.
With credit harder to obtain, more houses are staying on the market longer - especially the more expensive ones.
"They're expecting crystal credit," said Jan Johnston, a Realtor with William E. Wood and Associates in Virginia Beach.
In addition to having a squeaky clean credit history, would-be borrowers today should expect to have to put some money down and forget about any more 100 percent financing deals, Johnston said.
"That's what's wrong," she said. "The mortgage companies are not giving people mortgages."
Subprime mortgages, loans made to consumers with poor credit histories, have contributed to a nationwide tightening.
In December 2006, subprime mortgages accounted for 10.3 percent of all mortgages in greater Hampton Roads, including the Peninsula, according to ODU's 2007 State of the Region report. Some in the market think it's worse than the study suggests.
Earlier this month, President Bush announced a plan to freeze the interest rates for some subprime mortgages.
Based on current national figures, ODU's Economic Forecasting Project preliminarily estimates that fewer than 1,000 households in Hampton Roads would be affected by Bush's plan.
The proportion of subprime loans in delinquency as of last year was 7 percent, ODU reported.
Some with on-the-street knowledge of the local market say the subprime problem is more significant than many want to acknowledge.
"It is a big deal here," said John Henry Martin, a Western Branch real estate broker. "People are trying to play it down, so it doesn't become a self-fulfilling prophecy."
Subprime loans are "huge," Johnston said, adding that many local loans in the area were sold to Countrywide Financial Corp., a California-based lender frequently mentioned in national stories as one of the companies hardest hit by the subprime mess.
Bristol, the Chesapeake mortgage broker, agreed "there's a large amount" of subprime loans in Hampton Roads.
A few years ago, so-called "Alt-A" subprime loans could be given to applicants under terms that did not require them to document their income or assets. Deals could be arranged simply based on what applicants said.
"It did happen more than I care to say," Bristol said.
As home values soared, people were approved for $1 million homes on the assumption they would be able to sell them later or refinance, Martin said.
"Virtually everyone was willing to throw caution to the winds," he said. "Everybody wanted that money; they were looking the other way."
Bristol does see one positive side for buyers to the sluggish housing market: "People who have waited, they're going to get a great deal."
Robert McCabe, (757) 446-2249, robert.mccabe@pilotonline.com
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Lesson Learned....
My wife and I were one of those families that listened to the "prices will keep climbing" and "get rich quick" brokers in 2005, and we paid a high price. Having never gotten involved in real estate inveting, the broker spotted our gullible expressions and savings accounts a mile away, and quickly sold us a number of properties at their maximum value, 2 of them being his own. In short order, we were buried in pricey, complicated ARM loans, our life savings was wiped out, and we nearly lost our own home. It took 18 months to sell the last of our properties, and the shady loan broker made a fortune off of us. Before we got into this, we were within a few months of being able to pay our own home off. Now we consider ourselves extremely fortunate just to keep our own home, and we are now starting over, with huge tax liabilities from multiple short sales in 2007. Want some free advice? Work hard, save your money, stay away from ARM's, and get everything in writing.
Just wait!
After they close Oceana there will be another 50% of homes with no value on the market! This is just a small taste of things to come for this area. This area does not have anything in place, or on the way, to support the area like the military does. Even the newly renovated Ford plant tanked. I personally can't wait for this whole area to take a dive.
Let them sit
God I sit here and laugh every time I read about the housing crunch these people expect us to feel sorry for them and the builders around here and every where else.If every body would just let them learn from this we would all bennifit from it in the long run.Why would you pay that for a house that is so over priced it is unreal.I feel no pain for these type of people at all and now the goverment will bail them out(or I mean us)Not such a great area to live now.
Glad I Did Buy A House
I used to ride through Greystone in Chesapeake, every week looking at the houses. On the initial sign when they first started building it said home from $300,000 to $600,000. Then a year later the sign said homes $600,000 to $900,000. I knew something was wrong with the market because the property I wanted was $600,000 and the people next door to it had paid $357,000 for their house a year before.
I said I rather rent and wait for the bubble to burst.
What else is in surplus?
Real Estate Agents. There are to many trying to sell off this surplus of housing and they still want to make 2003-2005 commissions. Be careful when you listen to one and remember they are looking at their bottom line as well as yours.
Inventory is down this month?
Someone else commented that they are a Realtor(tm), and that they looked in REIN and inventory is down right now. I'd like to comment that I'm not a Realtor(tm), but I often make fun of them. Inventory is down BECAUSE ITS THE CHRISTMAS HOLIDAY, JUST LIKE ALWAYS. Conventionally, right after superbowl weekend is when sales should kick back in, correct? It won't happen this year (like it didn't last). Don't forget your lines. "It's a buyers market (No it's not)", "There is never a better time to buy (or sell) a house" and all the other lame lines that supposedly justify 6% commission. Financial planners are required to abide by standards which say they are not able or have to exercise caution when giving financial advice. Realtors(tm) and mortgage brokers and other sales people don't. People look to them for advice, and get taken. DON'T TAKE YOUR FINANCIAL ADVICE FROM SALES PEOPLE.
Challenge me. I'm the bubble master. I want 400 comments on this thread by tomorrow!
Time To Clean Sweep City Hall
While sub-prime lending has led to a great percentage of this problem, there are a number of homeowners who have conventional fixed mortgages that are in a pinch, due to the faulty real estate tax policy, that taxes homeowners on invisable money. Who really thinks they can sell their home for what the Chesapeake Tax Acessor says you can? It's a faulty system that has been overtaxing homeowners for years now. Chesapeake Citizens For Fair Real Estate Tax has been fighting for a COLA aligned property tax policy, that would keep property taxes inline with social security increases and raises that citizens receive through their employment. We need your help to make this happen. We must vote every City Council person up for re-election in May 08' out of office. If you like to be continually ripped off by outrageous property taxes, just keep voting for the same people up for re-election. "Change Can Happen, With Your Vote"
Ethans been posting about this since 2004
I have been commenting about this since 2004. This was not unpredicted. If your financial institution could not figure this out, they deserve to be fired. If your gov't couldn't figure this out, they deserve to be fired. I've been accused of being negative, but it's just common sense. I tried to warn you. We cannot have an economy based on selling each other rapidly appreciating objects paid for with increasing debt loads, while salaries remain stagnant when compared to inflation. Don't let the gov't bail out the gamblers. I'm sorry if you got in trouble, but if you overpaid for an item it's your own fault. BTW, I have no degree, but I've seen all these degreed people who cant figure this out. So sad.
Taxes
Now it's the governments turn to rape the homeowner, they will collect their higher taxes despite the decline in home values.
The Banks are the only winners!
We paid over 110% in interest over the principle over the life of our loan. That's right...the mortgage company doubled their money. How much interest does the bank give me for my savings that THEY turn around and loan to someone else...3% if that? Don't even get me started about the money made from escrow accounts. I'm just glad we bought a home that met our NEEDS rather than the biggest home we could afford. Now...am I supposed to feel sorry for the mortgage companies that loaned money to someone they KNEW couldn't pay it back so that some poor fool could buy a house that's too big for them in the first place? I only feel sorry for people that think that having a tax deduction for a mortgage is better than paying off the loan. Sadly, most would rather pay a $1.00 to the mortgage company than 2 cents to the government. Maybe now that business is slow for the Bristol mortgage company they will have the time to clean up their lot..the weeds are over six feet tall behind their building!
The pot of gold does not
The pot of gold does not always appear in many investments and especially
for those who bought homes under sub-prime adjustable mortgages. There was a time when you could not even get a mortgage that exceeded 2 1/2 times your annual income and you usually had to at least have the closing costs and a lawyer present to make sure you understood what you were doing and what could happen later especially with adjustable mortgages.
Will Rogers noted that 'You can't cheat an honest man.'
People got greedy. They took advantage of low interest on variable rate loans and an artificial boom in housing prices to mine equity in their homes to buy boats and cars and to invest in other schemes dependent on the housing price boom continuing forever.
They got caught when rates went up, and the artificial boom ended. They borrowed more than they could pay at realistic interest rates and squandered their home equity on toys and get rich schemes.
Now, those of us who saved for what we wanted instead of borrowing and invested in real equity instead of speculating in trends are supposed to bail them out, and we probably will. Rogers was right about cheating honest men, but he left out that dishonest men can rob them using government as their gun.
I guess the housing boom
was what convinced the builders of Edinswamp that putting a Wal-Mart in the front yard of a million dollar house wouldn't hamper sales. I guess that they will learn the hard way. On the other hand, based on past performance, they won't learn a thing.
Concerning the subprime mortgage issue, people aren't "losing" anything. They didn't have anything to begin with (the bulk were renters), and for two years or so they got to live in a house whose payment was lower than their previous rent. We better start looking at things from the perspective of those we want to pity. I believe they looked at subprime mortgages it as just another way to scam the system.
Why are the Kentches smiling?
I guess because it hurts too much to cry? I don't know what rank this naval officer is or what the couple's total income situation is, but to sign a mortgage on a $538,000 home with a $3,000 plus monthly payment in trendy Great Bridge makes me wonder if they weren't simply caught up in the "we'll make a killing on this house" delerium of 2005. Perhaps they needed five bedrooms and all those square feet for a large family. But I honestly think it was a combination of gold rush fever, a temporary loss of the senses, and a very convincing real estate agent (who pulled in a very nice commission). Now they're having to eat about a third of that $3,000 monthly payment while they move to Texas and find another place to live there. I wish them the best of luck in their predicament and hope others learn from this situation. Be careful! Don't get caught up in these "Everybody's making a fortune ... " frenzies. From so-called "savy" developers (i.e Buddy Gaddams) down to individual home buyers, don't let the lure of a quick buck blur your better judgment.
Beanie Babies and tulip bulbs
One of the big reasons for the markets doing what they are doing nationwide was the onslaught of marketers pushing their "get rich in real estate" seminars and books. Now those people who thought they could get rich collecting a thousand dollars rent on a home with a $1500 mortgage are starting to wake up and trying to bail out. Just like the Dutch tulip bulb craze many centuries ago and the people with the boxes of beanie babies in thier closet they bought for an investment, these people are learning the hard way about speculation. People mortgaged thier houses in the early 1900s to invest in stocks, the same thing now with getting rich in real estate.
Well Done, Virginian-Pilot!
I certainly may have missed it, but to my memory this is the first in-depth article on the local real estate market you have done since reviewing Gil Yocum's last forecast. All the moaning and nashing of teeth in the national press is interesting, but a good review of how that all translates to Hampton Roads has been long overdue. I understand from friends that you are constantly lobbied by HR real estate professionals to report with a positive spin on the local situation; on the other hand, Dr. Yocum, as a economic forecaster, always tends to be more conservative in his pronouncements. As usual, the truth lies somewhere in the middle. Keep up this reporting, and let's have more real estate articles more often!
Overshot
The subprime mess caused property values to overshoot their real value.
Things will equal out at a lower level.
I just wonder how likely localities will be to assess lower too.
Fat Chance
And I have to wonder
Why there are so many unsold McMansions. Could it be that no one in this area can truly afford them, with an average median salary of $35,000 per year, per person. And these McMansion subdivsions, each look just like the next one, all very much like the looked down upon cookie cutter subdivisions built by the non-custom home builders. Two months ago there was a home on Kempsville Road - not a gated community, a pool or anything special, unless you count the overhead power lines - in Chesapeake listed at a cool 1 million, the builder was offering six months free rent, for a house that was going on 2 years old and had never been purchased. Yea right. Driving around I see all kinds of McMansion neighborhoods, here, there and everywhere, some right on the road, where building has been stalled. Poor builders! And imagine, sales are hopping in the range of $150,000. Could it be they are more in line with what people can afford? Well duh, go figure! Anyone with 1/2 a brain knew the high times couldn't last.
Loans
While most of the information in the article regarding loans is correct, the number of homes available for sell through the REIN is inflated. As of 12/31, 5:11 AM only 15429 attached/detached/new homes are available to new owners. Way higher than normal but not as bad as the media makes it out to be. While the overall real estate market is slow, one must remember above all that real estate markets are LOCAL, with each area having it's issues. Fortunatly Hampton Roads has escaped the major impact other than buyers have a large selection of homes to choose from. To sell your home today it has to be in great condition and well priced. Today is a great day to buy!
Poor reporting
This story has several totally inaccurate statements. In September there were 6,000 detached homes listed for sale in Norfolk, Va. Beach, and Chesapeake. This week their are 5,300 detached homes listed for sale. So the inventory of listed homes in those three cities has actually gone down by 700 homes in the last 3 months. How do I know? I am a realtor, and I look at the total number of homes for sale in those cities every single day on my computer.
In addition there is the comment that 100% loans are not available. I just sold two houses last week with 100% financing. There is no problem getting 100% financing for homes under $400,000.
The problem is that all the new homes that are being built are $350,000 and up. The builders overbuilt in the high price range, and that is where the problem lies.
Over taxed - we require refunds
Local city governments over taxed thousands of homeowners on phantom money we never had! Those of us that sold our homes under ther city's assessed value we taxed on money that never existed. Folks, it is a huge scam - and we all need to wake up to the massive windfall of money stolen by local governments. "Equity" is phantom money that we don't have unless we sell - why are we taxed on that? Why do we allow this?
home
Be fearful when others are greedy, and be greedy when others are fearful.
Do the math.
If wages went up an average of four percent a year, and inflation was under three percent a year.....please tell me what warranted housing prices increasing by 20 percent a year in Hampton Roads, between 2002 and 2005? Do the math......we're headed for one heck of a correction over the next several years in home prices. I noticed that many of the informationals on TV that used to push "house flipping" have been replaced by offerings of courses on how to buy foreclosures.....a sign of the times. And, if you think mortgage loans are a problem.....wait until the credit card and payday loan businesses start to implode. As my father used to say: "if you don't have it...don't spend it." I'm glad I listened to him. I wish more people had.
house
I knew call center jobs in this area cannot handle the 500K+ homes. Too many people watching "cribs", A + E and HGTV thinking they were real estate "experts". The same thing happened with the stock market crash back in '99 - '00. When amateurs start getting involved in certain investments, you know it is time to move on to a different strategy.
Driven by greed
Hopefully Darwinism will play out. Do not feel sorry for the builders, brokers and lenders. Everybody was in on it. The losers are the buyers(especially those that bought in 2005 & 2006) who were given bad advice by all parties involved.