Photos by STEPHANIE KLEIN-DAVIS The Roanoke Times

David Hite, a Richmond doctor, recently purchased a home at Smith Mountain Lake for what he says was a good deal.

David Hite, a Richmond doctor, recently purchased this house at Smith Mountain Lake in the Waterways development in Bedford County near Huddleston. The four-bedroom, waterfront house was originally priced at $900,000, but it spent a year on the market. Hite was able to buy it for $650,000.

Photos by STEPHANIE KLEIN-DAVIS The Roanoke Times

Above: Kevin Hite (left) of Fishersville watches with his brother David Hite as other members of the family and their friends splash around in Smith Mountain Lake. Kevin Hite said his brother's new house has become a favorite weekend getaway. Below: Dr. David Hite takes a dive into the lake, his daily ritual when he's there most weekends, he said.

Photos by STEPHANIE KLEIN-DAVIS The Roanoke Times

Above: Kevin Hite (left) of Fishersville watches with his brother David Hite as other members of the family and their friends splash around in Smith Mountain Lake. Kevin Hite said his brother's new house has become a favorite weekend getaway. Below: Dr. David Hite takes a dive into the lake, his daily ritual when he's there most weekends, he said.

More than 100 miles from home, David Hite arrived at his new waterfront house at Smith Mountain Lake, hauling a trailer of patio furniture.

"The boats are on the lifts. I've got paper plates, cereal, milk, juice in the refrigerator," said Hite via cellphone, ticking off the list of move-in supplies for his new home, purchased July 24, at the Waterways in Huddleston.

This is the Richmond doctor's second home, purchased for nearly one-third off its original asking price, thanks to the down real estate market.

The four-bedroom house, originally priced at $900,000, went unsold for 18 months. Eventually the price dropped, and Hite nabbed it for $650,000.

"It's not going to get any cheaper anytime soon," he said.

Lately, homes at Smith Mountain Lake, which stretches across parts of Bedford, Franklin and Pittsylvania counties, are more attainable for some buyers because sellers have slashed prices.

That's because the inventory at the vacation and retirement haven has climbed, the result of a nearly three-year nationwide housing slump. Real estate agents say the surplus inventory has driven prices to the lowest levels in years.

Smith Mountain Lake's real estate market hadn't recovered from the slump as of midsummer. Sales of waterfront and water access homes (those with access to the lake by slip, ramp or a community dock) were down 12 percent from January through July 31 this year, compared with the same seven months of 2008.

More recent sales, pending contracts and increased interest may signal better days ahead for real estate agents.

Still, it's too soon to say whether 2009 will be better than 2008.

Moving up

Hints of a revival in the lake market are emerging. Real estate agencies there are getting more calls and more walk-in traffic than they have in recent years.

"We've definitely noticed a pickup in the last 60 days," said Jeanette Childress, broker for Lake Retreat Properties in Huddleston. "I think we're beginning to see a rebound."

For the first time in 18 months, home sales in the Roanoke Valley rose in July, according to the Roanoke Valley Association of Realtors. The association tracks portions of Bedford and Franklin counties, though it does not break down sales of Smith Mountain Lake area homes specifically.

Waterfront homes at the lake did not move much in the first half of this year, though recent activity is more promising.

Twenty-six single-family waterfront houses were sold from July 1 to Aug. 25, compared with 24 in the same period in 2008, according to multiple listing service data.

Currently, an additional 23 homes are under contract, set to close within 30 to 45 days.

Those sales come after only 50 houses moved in the first six months of the year.

Paul Moore, a real estate agent with Wainwright & Co. in Moneta, said the recent uptick in sales and contracts indicates to him that the real estate market has begun its slow climb back up.

Another factor is "a sudden decrease in the number of new listings," said Moore. "New listings are down 9 percent from the previous year, but just this summer, they're down 20 percent."

A decrease in new listings may indicate that some homeowners have noticed the slight upswing and are waiting until housing prices go back up to list their properties, he said.

Other factors include a 3 percent decrease in inventory from the same time last year and decreases in the average sales prices (down 12 percent) and median sales prices (down 21 percent), Moore said.

The initial upswing will likely be slow, however. Because the lake is mostly a secondary or retirement home market, many people are waiting for their homes to sell elsewhere before they can buy at the lake.

"We keep getting reports on how the market has improved in New Jersey and Northern Virginia," said Barry Bridges, a broker with Weichert Realtors Bridges & Co. in Moneta. "So we've been waiting to catch up."

According to data from the Virginia Association of Realtors, second-quarter sales in Northern Virginia, where many lake-area residents come from, were up from last year by 8.6 percent. Pending sales are up 21.3 percent.

Tom Fansler, a real estate agent with Prudential Waterfront Properties in Moneta, said there are many people waiting for their current homes to sell so they can relocate.

The snowball effect is also fed by an $8,000 federal tax credit available to first-time homebuyers this year, Bridges said. The tax credit has spurred sales of homes already this year.

As people move into their first homes, the sellers often purchase larger, more expensive homes. The trend moves upward, meaning the people in the high-end housing market eventually will be affected by the first-time homebuyer incentive.

Eric Fansler, who works at Prudential Waterfront Properties with his father, said he thinks high-end homes costing more than $1 million will help lead the lake out of its slump.

According to multiple listing service data the Fanslers compiled, such homes are beginning to move. So far in the quarter beginning July 1, eight high-end homes have sold. During the same quarter last year, five were sold.

Lake deals

The sales bump has been spurred, in part, by buyers who increasingly are landing deals on waterfront property.

Since late last month, waterfront homes have sold for 9 percent less than the listing price. Similarly, buyers are landing some waterfront lots for 15 percent less than the original listing price, according to MLS data.

Jay Long, a real estate agent who lives in Richmond, bought a waterfront plot on Ashmeade Road in Moneta last month at an auction at Bernard's Landing. Long said he has eyed lake property for five years.

"Up until now, you would have to pay $400,000 for a nice lot on the lake with mountain views," he said.

Long paid $240,000 for the parcel, pending the sale's closing. He plans to build a one- or two-story house with a walk-out basement. Long, his wife, Neki, and their two children plan to use the house as a weekend vacation home. It may become their retirement home in the future.

"In my opinion this will be a once-in-a-lifetime opportunity for us," said Long, 36.

Russell Seneff, an auctioneer at Woltz & Associates in Roanoke, said a large portion of the lake's auction business lately has been from landowners who want to speed up the sales process instead of slugging through traditional sales channels.

"Three and four years ago, you could move anything at any price," he said. "That market has diminished."

The bubble bursts

Until 2006, Smith Mountain Lake's real estate market was hot. Demand and dwindling inventory drove prices to all-time highs, and buyers fought for sales in bidding wars.

The average price of a waterfront home at the lake soared to $736,526 in 2006, from $523,446 in 2004, according to the MLS. Lake builders designed mixed-use developments, and speculative home construction soared.

Some buyers considered lake property a better investment than the stock market.

Eventually the bubble burst, and housing demand crashed nationally. Smith Mountain Lake fell hard.

Sales of waterfront homes tumbled 49 percent from 2005 to 2006, and 33 percent from 2007 to 2008, according to MLS data.

Jim Petrine, a builder at the lake since 1984, said he saw the crash coming and stopped building in 2004. He turned to developing land that he already owned, because he said that business was less risky.

Some contractors pulled out of the market altogether. Other builders took on more remodeling business as speculative home building stalled, Petrine said.

Builders remain cautious, and home building activity at the lake declined sharply this year.

Bedford County single-family building permits specific to sections of the lake dropped 46 percent in fiscal 2009, from 2008.

"The bulk of our permits prior to the economic downturn were spec homes in the upper end, and that's what took the largest hit from the economic turndown," said Gary McIver, building official for Bedford County.

In Franklin County, single-family building permits declined 62 percent from the first two quarters in 2009, compared with the same period in 2008. Data for lake-specific building permits were unavailable.

Sales of waterfront and water access homes also decreased this year, with 135 properties sold from January through July 31, compared with 153 during the same time last year.

This year, the slow market for expensive homes drove some prominent lake area builders into financial trouble. In February, Smith Mountain Lake Partners, the developer of Sunset Cay in Moneta, filed for Chapter 11 bankruptcy. There were no buyers for the development's upscale Bedford County homes, priced at $450,000 to $600,000.

Those nine homes, now owned by StellarOne, will be sold at auction Sept. 17. The bank repossessed the property after Smith Mountain Lake Partners defaulted on a loan.

New homes at Smith Mountain Lake, byproducts of the intense building surge, are sitting for longer periods of time because of sluggish demand. For example, a home with water access at The Water's Edge in Franklin County was on the market for 1,002 days, from 2006 until May 2009, before it finally sold, according to MLS data.

As of late August, there were 377 waterfront homes on the market, according to the MLS. That's a big difference from 2004 and 2005, when there were about 100 houses for sale, Tom Fansler of Prudential said.

Because Smith Mountain Lake largely is a second-home area, real estate experts say it will be the slowest category to turn around.

Vacation homes are a discretionary purchase, said Walter Molony, spokesman for the National Association of Realtors, adding that sales of vacation homes dropped 31 percent in 2008.

Also, mortgages for expensive houses, known as jumbo mortgages, increasingly are carrying higher interest rates and stricter credit standards. That's making it difficult for the wealthy to afford a new home, Molony said, unless they pay cash for it.

Cyclical market

To be sure, the lake's real estate market is fickle. What's hot is constantly changing -- from condos to single-family homes to maintenance-free living.

"It goes in spurts," said Audrey Agee, associate broker of Century 21 All-Service in Moneta, who has been selling real estate at the lake since 1979. "All of the sudden you're so busy, you don't know which way to go, and then the phones aren't ringing."

If the lake area is indeed on the rise, as Agee and other agents hope, it will one day peak to 2005 levels or higher. The downside is, one day it will cycle back to the slump it's been in for the past few years.

"The inventory is here right now," said Ron Willard, president of The Willard Cos., a lake developer since the 1970s.

But when the inventory gets snatched and less is available, prices will go back up, he said.

"If we get the influx I think we'll have coming ... you'll see the cost of houses driven to an all-time high again based on the fact that we won't have the inventory for these people who are hopping ready to buy," Willard said.

Some lake home builders lately have been testing the waters with new developments, because they say they're feeling more confident, in light of local sales activity.

The Willard Cos. has a few projects in the works, including Grande Villas, a town home community at The Water's Edge, where prices will start at $1.7 million.

And Petrine, who owns a building company, Enirtep, is returning to home building. He's planning to build 16 waterfront homes near Hales Ford Bridge in a development called The Windward.

Prices for these craft-style houses will range from $595,000 to $1.4 million, and construction has begun on the model home.

But Petrine's still acting cautiously. Recently, he reduced the prices of the lots by $100,000 each, now starting at $199,000.

"I'm trying to be a little bit more realistic on what the market is doing right now," he said.

Laurie Edwards is a staff writer with Laker Weekly, a sister publication of The Roanoke Times.