By KEVIN POST Business Editor Press of Atlantic City
Welcome to the bottom of the real estate market. Might as well get used to it because we’ll probably be here a while.
One sign of the bottom is that home-price surveys are starting to show small and perhaps fleeting increases. Another is that houses are selling near their listing prices. And different surveys are picking up improvements in different places, the way boats drift in different directions in calm winds.
The calm of the real estate bottom is that the four-year fall in prices is ending, and that the stream of distressed properties hitting the market has been reduced — for now.
“We’re still heading toward bottom-end stabilization, and I think it will remain at that bottom end for two years, and will take three to five years before we see an uptick in the market in general,” said Carlo Losco, president and owner of Balsley Losco Real Estate in Northfield, the region’s largest independent agency.
Federal Housing Finance Agency second quarter home prices for the region support the trend seen earlier in figures from the National Association of Realtors, but less robustly.
FHFA said its housing price index dropped 2 percent in Atlantic County in the quarter, leaving prices 4.6 percent lower in the past year. That’s in line with a U.S. decline of 1.9 percent for the quarter and 4.5 percent for the prior four quarters.
Cape May County, however, was one of the few metro areas covered by FHFA to post an increase, up 1.1 percent for the quarter (but still leaving the price index 3.3 percent lower for 12 months).
The Realtor survey for the quarter had found a 5.6 percent rise in the median home price for the combined Atlantic, Cape May and Cumberland counties region — with prices rising 9.3 percent in Cape May County and 1.7 percent in Atlantic County.
Both surveys saw prices falling, but a bit more slowly, in Cumberland County. FHFA’s limited coverage there showed a one-year decline of 5.7 percent as of the second quarter, compared to 6 percent in the prior survey.
“I would like to think we’re bouncing along the bottom here,” said Brian Groetsch Jr., president of the Cape May County Association of Realtors.
Groetsch said southern county Multiple Listing Service figures showed a 5 percent gain in home prices in line with the Realtors survey, and a 3 percent rise since the first quarter.
“What’s encouraging is the volume of sales, which are up 12 percent year over year,” he said. “I pulled a report showing all the different areas within our market and what jumped out at me was a marked increase in sales in higher-value areas such as the barrier islands, which could be the reason for the bump in the median sales price.”
After years of steep home price declines — the FHFA said New Jersey prices are down 18 to 27 percent from their peak, depending on its survey methodology — stabilization is welcome.
“At least I can see the bottom. That’s all you can hope to garner out of this right now,” Losco said.
He said there’s a considerable advantage to the market bottoming out for real estate professionals: Pricing homes effectively becomes easier.
“I can tell someone today that if the price is at a certain point it will sell, where that wasn’t the case a year or two ago when we were heading for the bottom,” Losco said. “So you can give people accurate advice.”
That better pricing of homes and the stabilizing market are resulting in houses selling much nearer their listing prices.
“The actual MLS records (for Atlantic County) show that the houses that are selling are getting 97 percent of their asking price,” he said.
That asking price, though, often has been reduced significantly from what the seller originally hoped to get. Losco said there are many Internet-savvy bargain hunters tracking houses and their prices, even getting automatic alerts when homes have reached a target price.
He said he’s seen houses languish with no offers and then, after another small drop, multiple offers suddenly appear and you wonder “where did all these people come from?”
Market stabilization has been helped by the slowdown in foreclosure processing due to legal challenges and questions about paperwork, especially in New Jersey and the 20 other states where foreclosures are handled by the courts.
Nationwide, foreclosures sales were up 6 percent in the quarter and down 11 percent from the year before. In New Jersey, foreclosure sales fell 25 percent in the quarter and are down 46 percent from 2012, said RealtyTrac, which gathers and markets foreclosure information.
Atlantic County’s 117 foreclosure sales were a third less than the first quarter and half the number from the second quarter a year ago.
Cape May County’s 50 sales were a 6 percent increase from the prior quarter, but still down 57 percent from last year.
The 31 foreclosure sales in Cumberland County were a 19 percent increase for the quarter, but a 46 percent drop from the same period in 2010. And Ocean County’s 258 sales were up 9 percent for the quarter, but down a third from a year ago.
Losco said the processing delay of foreclosures has helped with the biggest challenge for home sellers — appraisals.
He said getting loan appraisers to value a home high enough for a sale agreement to work amounts to having to sell the home twice for real estate agents.
As a certified general appraiser himself, Losco said he understands the pressure on appraisers. “I see a lot of bulletins to appraisers, and in most cases they’re mandated to state how many bank-owned properties are in the area, and sometimes ordered to put three bank-owned properties in their appraisal report.”
One group that doesn’t need to worry about appraisals or financing is cash investors, and Groetsch said he’s seen “a staggering increase in cash transactions.”
Cash home sales are up 48 percent from a year ago in MLS data, he said.
“Most cash transactions are on the barrier islands,” said Groetsch, who is also broker associate with Century 21 Gilmartin & Co. in Cape May. “Second home and investment buyers are looking for alternatives to invest their dollars versus the stock market, which is very volatile right now.”
With the processing slowdown, foreclosure sales accounted for 17 percent of sales in Atlantic County, 7 percent in Cape May County, 15 percent in Cumberland County and 13 percent in Ocean. In the U.S., they still make up a third of all home sales.
The building backlog in bank-owned properties in New Jersey is one reason why Losco and others don’t expect a rebound soon.
“I don’t see an upward trend because once the banks start releasing properties, in a small market like this that could have a huge impact,” he said. “When they turn the valve on, that’s definitely going to be something we have to contend with.”
Groetsch said the current signs are encouraging, but the industry needs to see more buyers obtain conventional and FHA-backed mortgages — which requires administrative or legislative action at the federal level.
“Hopefully we’ll all be better off for the time we spend on the bottom,” he said.