Tight credit, uncertain market make it tough for buyers

Since she put her Norfolk rental home on the market four months ago, Robyn Hofheimer has lowered the asking price three times. Still no bites.

Hofheimer, 31, and her husband own two houses in Norfolk. They live in one and rent the other. Now, the couple want to sell both and move to Virginia Beach, where they grew up. Timing isn't on their side.

"The market is just not moving out there at all," she said.

At the peak of the housing boom three years ago, it took less than a month on average to sell a home in Hampton Roads. Economists at Old Dominion University expect the average will rise to nearly three months by the end of this year.

In the past two years, the number of homes for sale in Hampton Roads has skyrocketed to historic levels amid the largest housing market slowdown in more than a decade. In August, 14,894 homes were unsold - nearly four times as many homes as were on the market in August 2005, according to the Real Estate Information Network, the local multiple listing service. Its figures include South Hampton Roads, the Peninsula, and outlying regions including Williamsburg and northeastern North Carolina.

At the current sales rate, it would take 10 months to work through the backlog of homes for sale. At the peak of the housing boom, the supply ran as low as one month. The ODU economists say a four- to six-month supply is normal.

At the same time, foreclosure-related filings in the Hampton Roads region have more than tripled in the past year, according to RealtyTrac, which reported that in August one in every 959 homes in the region was in some stage of foreclosure. If foreclosures continue to rise, that pushes more homes onto the market.

As the supply of homes for sale rises, the number of potential buyers is falling. A tight credit market is making it harder to get a mortgage, and this month the federal government did away with a program that allowed buyers to get a no-money-down mortgage.

"Fewer people are qualifying for loans," said Ron Foresta, president of Rose & Womble Realty's resale division. "Either the down payment is not there, or they have low credit ratings."

The result is falling home prices across the region and long waits for homeowners hoping to sell their property.

Builders and homeowners alike have marked down asking prices and are offering incentives to get contracts. Realtors have said it is common to see a price on a particular home fall $25,000 in one month.

The median price for a new home in South Hampton Roads was $325,000 in August, down 4 percent in the past year and nearly 20 percent in the past two years, from $404,090, according to estimates by the local multiple listing service.

Individual homeowners have been reluctant to lower asking prices. In August, the median price for an existing home was $231,000, down 2.9 percent from a year ago but up slightly from 2006.

Real estate experts said many homeowners are asking unrealistic prices.

"Sometimes they don't necessarily listen to what their agent is saying," said Shirley Conner, a broker with Prudential Decker Realty. "A lot of people start out at what they would like to get for it. Then when they don't get any showings, they reassess it."

Vinod B. Agarwal, an economist at ODU, said individual homeowners usually take longer to lower their prices because they are more vested in their homes.

"Sellers see that their neighbor sold their home last year for $400,000, and they still think they should sell theirs for $450,000," he said. "Until the sellers realize that this is no longer the same market as 2005, it's going to take awhile to get through this inventory."

Agarwal predicted existing home prices will fall by as much as 5 percent in the next three months.

Gina Wilkinson, a real estate agent for Prudential Decker Realty, said homeowners with financial problems are coming into the market in droves, hoping to sell a home and unload a mortgage they can no longer afford.

"You've got people who can't sell properties because they haven't really owned them long enough to have any equity in them," Wilkinson said. "I run into people all the time who took money out of their homes but didn't put that money back into the home. Yet they have a new BMW in the driveway."

Some home sellers seem to be getting the picture. Two weeks ago, Mari-Ann Messick put her Virginia Beach house up for sale in hopes of trading it in for one closer to the beach.

Messick, 45, and her husband bought the three-bedroom home in the Lake Shores neighborhood in 1992 for $142,000. She listed the house last month for $345,000.

"Two and a half years ago, we could have easily gotten $400,000 or $425,000 for our house," she said. "Now I wouldn't even dream of listing it for that much. Nobody would even look at it."

The glut of existing homes is making builders retrench and look for ways to keep revenue coming in as new home construction slows.

"All of us are down right now," said Terry Gearhart, vice president of marketing for home builder Terry Peterson Cos. "Everyone had to adjust pricing. We have to move inventory."

Gearhart stressed there are still pockets of strength across the region, including his firm's Sajo Farm development in Virginia Beach, which has homes starting around $300,000.

He said sales have been so strong at the 295-home community that Terry Peterson is considering raising prices.

For buyers, the abundant supply normally would make this an ideal time to start scanning the market for deals, with plenty of options and low interest rates. But turmoil in the banking system has potential first-time buyers such as Denise Watson a little wary.

Watson, 37, of Norfolk, and her husband have never owned a home. The couple live in base housing at Norfolk Naval Station. She is a nurse, and her husband is a military policeman.

"We thought about buying a house last year," she said. "But the people we knew in real estate told us to hold off until this year."

Now the couple has mixed feelings.

"You don't want to buy a house for $350,000, then six months later it drops to $300,000," she said.

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com