By Mary Childs
While the nation saw an unexpected 4.5 percent gain in housing starts for December from the month before, Lexington real estate could be correcting inflated local housing costs.
Housing starts and sales were “normal” for the first four months of 2006 in Lexington, but then flattened in what Robin Eddy of Mead Associates, Inc., a major real estate firm in Lexington in the Shenandoah Valley, called a “really good reality check.” The city authorized seven building permits - all residential, and including new construction, alteration, remodeling and renovation - for December of 2006, three times the two permits issued for December 2005. For the entire year, however, the total was down by 5 percent from 84 to 80.
National housing starts for the year were down 12.9 percent, the biggest decline in 15 years. That decline was reflected in local housing markets, as well, as buyers became more tentative in the wake of the housing bubble’s apparent burst. After almost five years of “flipping” houses and speculative real estate proving lucrative, the prices became “too high to last,” Eddy said. “No one wanted to go first. There were good deals on the market, but everyone was sitting on the sidelines.”
J.W. Entsminger, who rents largely to Washington and Lee University students, says that the national housing starts statistics don’t affect Lexington because “we’re on such a small scale.” He’s not worried.
“There’s always a winter slowdown. It will pick back up,” he said. “I haven’t talked to any other contractors, but I don’t think [national housing start and real estate fluctuations] have any impact on us.”
But the flattening of the local market in both construction of new houses and sales of existing homes could point to a more serious correction.
“If anything, people are finding that they’re overbuilding us here,” Eddy said. “There’s too much speculation. Anyone can look around and see that no one’s buying.”
Eddy and Entsminger agree, housing prices are inflated for a small town.
Eddy cites three reasons: retirees who are attracted to sleepy college towns; Virginia Military Institute and W&L alumni, who want to move back to Lexington; and younger couples who can do their job via the Internet, and have the freedom to choose Lexington, which she calls a new phenomenon.
Eddy also gives tours to prospective W&L professors, and Lexington’s high prices have made her job difficult.
“I have to make a point to go around to spots they can afford to buy,” she said. “They can’t afford housing around here unless they’re willing…to do a little work on whatever they buy. They just don’t have the salaries.”
She also cited the example of her mother who recently bought a house in a nice area of Richmond.
“Her house is darling,” she said. “But if my mom’s house were in Providence Hill [a comparable neighborhood in Lexingon], it would have sold for quite a bit more. I mean, that’s crazy.”
Entsminger echoed her, saying, “retirees come in from up north where they pay primo for their houses, and come here where they get the same size house for just a little less,” driving the prices up to nearly the levels of D.C. suburbs.
Home construction wouldn’t be affected here because Eddy said retirees can afford to build a home regardless of national real estate trends. In the longer term, if retirees do feel the squeeze in a hurting economy, annual building permits would probably take a significant hit. The future of social security and retirement plans will affect the health of Lexington’s housing market in the future.
As for reports that the favorable housing starts for December were due to the warm weather, Eddy noted that November was warm, too, and “we weren’t doing that much.”
Graphic by Emily Hulen
Produced by Washington and Lee journalism students.
Lead supervisor: Prof. Claudette Artwick
Reporting supervisors:
Technical supervisor: Michael Todd