In a glutted market, homes are slow to sell

It took Mike and Val Murphy two weeks to sell their Greenbrier home three years ago to move to a smaller home in Chesapeake's Etheridge Woods neighborhood.

Now the Murphys want to move again, to Moyock, N.C., to be closer to family. They knew the real estate market had changed, but they wanted to at least recoup their investment in the home.

They listed the three-bedroom rambler on Grantham Lane for $379,900 - in January. Nine months and two price reductions later, still no buyers.

"I figured we'd have the home on the market two months," said Val Murphy, 54. "We're pretty discouraged at this point."

Although home sales in Hampton Roads have picked up in recent months, local sellers still struggle in a market glutted with homes.

At the end of September, 14,333 homes were on the market across the region, according to the Real Estate Information Network, the local multiple listing service. At the current sales pace, it would take nearly 10 months to work through the backlog of homes for sale. Economists consider a six-month supply a balanced market.

Three years ago, before the Murphys moved to Grantham Lane, the supply of homes in Hampton Roads was less than four months.

Today's backlog is in part made worse by several months of slow home sales earlier this year, which bring down the average pace of sales for 2009.

The market for homes priced less than $215,000 is the region's healthiest sector with 5,390 homes on the market. Based on the average sales pace this year, that equates to about an eight-month supply. New homes in that price range have just over seven months of inventory remaining.

But the higher the price range, the more months of supply remains.

So far this year, buyers across the region have purchased 423 homes priced between about $510,000 and $1 million. With 1,574 more on the market, it would take nearly two and a half years to work through the inventory.

For homes of $1 million and more - with 54 sold so far this year and 395 on the market - the backlog is nearly five years.

"If anyone says there's a sellers' market in any price range, they're dreaming," said Vinod B. Agarwal, an economist at Old Dominion University. "It probably won't be a sellers' for another two or three years."

Economists and real estate experts said part of the problem is that individual homeowners across the region have been reluctant to lower prices. In August, the median price for an existing home in South Hampton Roads was $225,000, down 2.6 percent from a year ago, according to the multiple listing service.

"You know how much your neighbor sold their house for, and you want to sell your house for a little more," Agarwal said.

Van Rose, president of Rose & Womble Real Estate Co.'s new-homes division, said home builders across the region were much quicker to adjust prices.

"They are certainly more challenged on the resale side, because they're dealing with individual sellers who think their homes are worth more than they probably are," Rose said. "When a Realtor goes down to list their home, it's much more difficult to do that than when they sit down with a builder that has a financial noose around his neck."

Other sellers may be unable to lower their price without being put into a short sale, which is when a home is sold for less than what is owed on it, Agarwal said. That's especially true of people who refinanced to cash out equity in the past few years, he said.

The home sales volume from June to August in South Hampton Roads was up about 6 percent compared to the same period last year, in no small part because of the $8,000 federal tax credits for first-time home buyers and historically low interest rates.

At the same time, the average time on the market for all homes in the region was about 85 days - about 8 days longer than a year ago. The average was likely pushed higher by an increasing number of foreclosures or short sales, which take longer to close.

Ron Pearman, regional vice president for Long & Foster Real Estate, said sellers face a real challenge in trying to price their homes.

"Everything is a moving target out there right now," Pearman said. "Prices are still declining. And we've got all these foreclosures that are lurking around the corner."

Pearman expects inventory levels to remain high in coming months as banks and lenders continue to push foreclosed homes onto the market.

The Murphys' home is situated in a price range - $215,000 to about $510,000 - that contains 6,974 homes. From the beginning of the year through August, 5,670 homes sold in that price range. At the average sales pace for those eight months, it would take nearly 10 months to work through the inventory.

The couple initially paid $319,000 for the home built in 1989 on a lot slightly larger than a quarter of an acre. They spent an additional $50,000 on a new roof, carpet throughout the house, and new siding.

They decided late last year to move to Moyock to be closer to Val's parents. When several months passed with no buyers this year, the couple shaved $30,000 off the asking price. Recently they lowered the price again, to $337,300.

Liz Cochran, an agent for Exit Realty Specialists, started marketing the couple's home in July. Since then, the home has been viewed 10 times. As an incentive to get more agents to show the home, she recently raised the commission another agent would get for a sale.

"It's really a great house, and priced really competitively," Cochran said.

There are fewer than 10 homes for sale in the Etheridge Woods neighborhood. The Murphys' home, with its spacious living room and decent-size back yard, is priced near the middle of the pack.

They have looked for a home in Moyock, but as they've waited for their Chesapeake home to sell, several prospective homes in North Carolina have been snapped up by other buyers. Now the summer selling season is behind them, and the Murphys expect to have the house on the market well into next year.

"We're not thrilled about it," Murphy said. "But the bottom line is, we're not going to give the house away."

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