Real estate market

Buyers 'lying low' as housing market slows

Economists may not be using the R-word -- recession -- but Rockbridge area Realtor Paula Martin said she has felt the housing market slowing down since May 2006.  Martin specializes in higher priced properties and homes in the Rockbridge area.

"By the end of last year it was as if there was a collective pause among buyers," Martin said. "It was like they just inhaled and weren't exhaling." 

Of Martin's 55 current listings, three are under contract. Of 441 total listings In Rockbridge County, only 19 under contract.  Martin estimates the average value of houses has gone down 18 percent in Rockbridge County and Buena Vista and 6 percent in Lexington in the last year.

The New York Times reported recently that housing prices nationally have fallen 14.1 percent.  The increasing number of foreclosures has flooded the market with homes, while the slow economy and tight mortgage market have limited the number of potential buyers.

Martin said the housing market has slowed in part because homeowners on the low income end are not selling their houses.  When homeowners stop selling their houses and buying higher valued ones, the market freezes. 

The middle- and high-income homeowners do not have the ability to sell their houses and buy a better one. Investors are afraid of entering the stagnant market and being unable to turn around and sell their investments.

"They're not pulling the trigger -- they're not spending their money," Martin said. "They're looking at the economy and they're going 'we don't feel secure.'"

Two years ago North Carolina resident William Green bought a 19th century brick house on Houston Street in Lexington as an investment.  Green thought he would have no problem selling it to a retiree or an alumnus of Washington and Lee University or Virginia Military Institute.  But in the two months Green has had his home on the market, his real estate agent has not received a single call about it.

"It hasn't really panned out," Green said.  "I just think that people are lying low right now."

Sellers now are caught in what is called a buyer's market. That means there are more sellers than buyers.  Sellers have to compete with one another for a limited number of buyers, causing home values to go down.  For some homeowners, it means they can't sell their homes for enough to pay off the mortgage. 

Martin suspects that investors are waiting and watching to see if the market picks up.  In the meantime, they are holding onto their money, and properties aren't being sold.

Buena Vista Realtor Dennis Hawes sells the majority of the foreclosed houses in the Rockbridge area.  Hawes has found that foreclosed houses are selling 10 to 15 percent below his assessed value after they are put on the market; last year it was 5 percent below.  Still, the foreclosure business is going strong -- Hawes expects to sell as many as 30 this year.

"There's always investors that are going to buy if it's a good deal," he said.

Along with real estate, construction has slowed down.

"This spring we are actually seeing a reduction in the number of prospective opportunities for work," said Tim Welsh, owner of Welsh Construction in Lexington.

Welsh has had steady business thanks a clientele of professionals and professors at the local colleges -- people who can afford to remodel their houses or have an addition built even when the economy is tough.  Still, Welsh said, he is being careful with his spending and making an effort to get his company's name out.

"I am getting a little more concerned about how long this downtrend is going to last," he said.