Sunday, July 22, 2007
Home buyers starting to pay less for more
A soft market has led to price reductions of some high-end housing.
The latest from The Ticker blog
DALEVILLE -- For years the subdivision in Botetourt County where Janet Beasley lives was perhaps the hottest among hottest home buyers there. But now the development, called Ashley Plantation, sports a smattering of for-sale signs, one in her yard.
Her 3,000-square-foot house has been on the market for six months, has undergone one price reduction, down to $515,900, and has been featured in a Sunday showing. Meanwhile, Beasley keeps mowing her lawn and picking up stray golf balls. Still, no buyer.
"I feel like it's going to sell," she said. "Got to happen eventually."
And it probably will.
But for now, the market for such high-end housing in Beasley's area is as soft as a sand trap on the 18-hole course that winds through her development.
Not that sellers' prospects have deteriorated to the same degree as in some U.S. metropolitan areas such as San Francisco and Palm Beach, Fla., where downturns of 25 percent from last year have contributed to a nationwide 10-percent drop in used-home sales.
But pockets of pricey housing are selling slowly from southern Botetourt County to Smith Mountain Lake.
Of course this decline directly affects only a small segment of the area population, because income levels preclude many from owning an upscale residence. But it is an indication of how the nationwide downturn in real estate is hitting home for some who live in the Roanoke Valley.
Winners and losers
As in most economic events, there are winners and losers. Because of price cutting, elegant, half-million dollar homes at Ashley Plantation are for sale at tens of thousands of dollars less than they would have cost a few months ago -- a great opportunity for someone to attain a prestige address.
The downside is, the soft market is limiting the financial gains and hampering the plans of luxury homeowners such as Beasley, whose husband must move out of state for his job.
Such conditions were unheard of two years ago when builders were selling houses before they could put in the lawn and scrape decals off the windows.
When Beasley bought her house, many a prospective buyer was competing with others, and the mantra for some was, "We saw it first." More recently, only two people came to her open house.
Many are betting on the downturn to be temporary. Crews have begun construction of Daleville Town Center, with plans for 300 houses, town houses and condominiums. The houses will cost $500,000 or more.
"I don't think it's any big secret that it's softer, but there are still buyers," said Andy Kelderhouse, president of Fralin and Waldron, Daleville Town Center's developer. "The question is, when will it rebound and how strongly?"
Builder and Ashley Plantation resident Robert Graybill gave this answer: "The recovery is on the way back, but it's slow," he said. During a speakerphone interview, he used his free hands to install mantels on each side of a see-through gas fireplace in a $675,000 home that has been on the market for eight months during construction and for which he lowered the price from $699,000 in response to other builders' doing the same with their new properties.
For sale
Of the 320 homes at Ashley Plantation, 36 are for sale. Of them, 24 are new and 12 are existing homes to be resold.
Ray Sprinkle, a Daleville real estate agent, said it would take 20 months to sell all offered upscale property in the $500,000 to $750,000 price range; four to seven months is what real estate professionals consider an ideal "housing inventory," he said.
"There's just too much supply out there for the demand right now," Sprinkle said.
Audrey Agee, who has sold real estate at Smith Mountain Lake for 28 years, said sellers of expensive homes in that area noticed a drop in buyer interest late last fall. Like most other real estate agents, she professes optimism.
"This is just a little bump in the road," she said. "People are going to come to this lake. There's no doubt about that. It's just not as fast and furious as it was a year or so ago."
Some high-end properties are selling. Edward and Sheryl McNally sold their house on White Oak Road in South Roanoke in May for $460,000. They received $15,000 less than the original asking price, but found a buyer in about three weeks.
"We were lucky," Sheryl McNally said, noting that two other White Oak Road properties were for sale at the same time.
Real estate professionals attribute the 10-percent national market downturn to a combination of factors. These include consumer hesitancy about making a home purchase in an uncertain economy and tighter lending practices for subprime borrowers and, in some cases, financially stable borrowers.
Lawrence Yun, National Association of Realtors senior economist, cited those factors and a falloff in new-household formation, saying more people are sharing dwellings, adding a roommate or moving in with parents to make ends meet.
But several trends bode well for the industry, including job and economic growth and favorable mortgage interest rates. Conditions are suitable for sales to pick up when buyer confidence comes back, he said.
About Ashley
Ashley Plantation is a 600-acre development on U.S. 220, about three miles north of Interstate 81, that has transformed a former cattle ranch during the past 10 years into an enclave of comfortable living. The 18-hole golf course is being expanded to 27 holes, and it is augmented by a clubhouse area with three pools and two tennis courts.
One homeowner has a for-sale sign in the front yard and one in the back yard facing the golf course.
A drive up the development's Stonewall Drive in early July revealed six of its 13 houses for sale. The owner of 125 Stonewall Drive, who is moving for employment reasons, cut his asking price from $549,000 to $515,000 recently -- $10,000 less than he paid in April 2006.
Here's one reason buyers are few: To buy a $600,000 home, a buyer would need at least $120,000 cash as the down payment. Then, to cover the roughly $3,500 monthly mortgage payment, the buyer would need a pre-tax, household income of about $95,000, said Eric Compton with the mortgage brokerage Salem Financial. The median household income in the Roanoke Valley is about half that, limiting the pool of potential buyers.
In contrast, higher-income buyers abound to support the high-end housing market in many major metropolitan communities, The New York Times reported July 11.
Even where conventional housing is generally depressed, properties with price tags in the high six- and seven-digits continue to sell briskly, the newspaper said, based on an analysis of property sales.
"Affluent families continue to do better than others, thanks to healthy income gains and a rising stock market," the Times reported.
The market
In all, Botetourt County had 58 homes priced between $500,000 and $750,000 for sale on July 11: 24 at Ashley Plantation and 34 others in a number of upscale subdivisions and neighborhoods.
Casey Dawkins, who directs the Center for Housing Research at Virginia Tech and teaches urban affairs and planning at Virginia Tech, said new homes across the nation are going unsold longer than at any time since the late 1990s. The median time on the market was nearly six months in April, the latest figures available.
"When the housing market cools," he said by e-mail, "new, single family homes are often the first to feel the effects."
Real estate agent Anne Huffman, whose husband A.R. Overbay developed Ashley Plantation, said she continues hearing from buyers who still want an Ashley address. Thus the subdivision still retains echoes of what Huffman said was eight years of being the top-selling subdivision in Botetourt County after it opened in 1997. The typical buyers are people with the financial flexibility to buy a home simply because they want to. They like Ashley's amenities and setting. And they are less concerned than a middle- or lower-income buyer about rising interest rates.
Many buyers are from out of state, and for some of them, the holdup is their inability to sell their home in a depressed market elsewhere. For instance, 215 Stonewall is under contract to an individual who can't close until he sells his $900,000 Florida residence, Huffman said.
Huffman said the downturn is at least partly psychological, fueled by a gloomy picture of the real estate market painted by the news media at a time when conditions in the Roanoke Valley are pretty good.
Indeed, buyers placed a like number of valley homes under contract during the first five months of this year as during the first five months of last year, while the state posted a nearly 11 percent drop in that statistic, according to the Virginia Association of Realtors. Property at Smith Mountain Lake is still changing hands at the same rate as a year earlier, when all price ranges are taken into account.
As a sign of industry confidence, or perhaps its affinity for risk, new homes continue to be built. Another premium development in southern Botetourt, Santillane, is opening a new cluster of 28 vacant lots to builders. Twenty Ashley Plantation lots were placed on the market Friday to be priced between $80,000 and $135,000. That's about $20,000 less than they would have fetched two years ago during a period of peak demand for Ashley Plantation real estate.
Twenty-four prospective buyers have put their names on a waiting list.
"We feel that's not bad," Huffman said.
