Homes sales down, so why are prices up?

It’s been another couple months, and the local real estate market still hasn’t moved. According to the latest report from the Charlottesville Area Association of Realtors (CAAR), the first quarter of 2008 saw the lowest number of homes sold since 2000. But buried in this pile of bad real estate news was a curious fact.

The milieu was nothing different: sales are down, the number of days that homes sat on the market up. But while the market sagged, the median sales prices on homes in Charlottesville and Albemarle County jumped by 12 percent and 18 percent, respectively.


Percentage increase in Albemarle median home price compared to first quarter of 2007


Percentage decrease in Albemarle sales compared to first quarter 2007

Fewer sales, more money? Blame it on the ever-tightening credit crunch.

After the bottom fell out of the subprime mortgage debacle, lenders started to look at potential borrowers with greater scrutiny. Gone are the days of borrowers with weak credit snagging 100-percent loans—mortgages with no money down. Higher-priced houses are still moving because better-off buyers have an easier time getting loans.

“The loans that are very difficult to find are the 100-percent loans and the subprime market,” says Dave Phillips, CEO of CAAR. “Those are not the type of loans that you need for a million-dollar place.”

Still, that doesn’t mean those $1 million homes are being snapped up hours after listing. There are currently 576 homes on the market priced at $1 million or more.

“And we only sell about 100 of those a year,” Phillips says with a wry laugh.

The high-end segment of the market is not alone in its overflowing inventory. The glut of homes continues, with the average number of days on the market peaking at 114 for this quarter, up from 80 last year.

And like last year, the market is waiting for first-time buyers to jumpstart it. Sales are sagging in part, says Phillips, because would-be buyers are saddled with homes of their own they can’t sell. And while the market waits on some new blood, those homes that have been languishing on the market aren’t doing it any favors.

“The sellers have refused to budge on the prices,” says Phillips. “There are some homes that are on the market for the 2005 price. And those sellers have refused to acknowledge that the marketplace has significantly and fundamentally changed since 2005.”

And that, he says, is hurting everyone. Sellers are using high listing prices as guideposts when pricing their own homes. And the glut makes marketing it even harder.

“We’re telling sellers to price their homes right or get off the market,” says Phillips. “It’s as simple as that.”
And how’s that been working?

“Not very well,” he says with a laugh.

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