Housing at 2002 levels, sales fall 23% from May 2010

Housing at 2002 levels, sales fall 23% from May 2010

June 22nd, 2011 by Ellis Smith in Business Around the Region

A home is seen for sale in Alameda, Calif. Home prices have fallen nationwide, stymied by foreclosures, a surplus of unsold homes and continued reluctance of Americans to buy homes. (AP Photo/Ben Margot)

Chattanooga real estate remained sluggish in May, though some statistics indicate that the market may be stabilizing.

The number of homes sold by Realtors fell 23.5 percent from the 634 sold in May 2010, though home sales were up 0.2 percent over April's figures.

The 485 houses sold in May were the fewest sold in that month since 2002, when 479 were sold, according to figures provided by the Greater Chattanooga Association of Realtors.

Local median home prices also fell 4.3 percent over the past year to $124,900, but were up 4.5 percent from April. The number of days a home stood on the market before a sale increased 11 days from the previous year, though it was unchanged from the prior month.

However, comparisons using 2010 figures are inevitably distorted because of that year's homebuyers tax credit, experts have said. The tax credit caused home sales to spike artificially before crumbling to new lows when it expired.

One real statistic that heartens Realtors like Jennifer Grayson, president of local group, is the drop in local foreclosures. Chattanooga foreclosure sales fell even as foreclosures nationwide made up 31 percent of all purchases. The Associated Press reported that forceclosures could rise once pending foreclosures backlogged in courts and probes hit the market

"After months of hovering at a consistent level of about one-third of our MLS sales, foreclosures are now showing a consistent drop to less than one-in-four of sales," Grayson said. "More people are staying in their homes, and that has to be a gratifying sign for anyone."

That may be good news, but the structural conditions necessary for a quick rebound don't yet exist, said Kurt Reiman, head of thematic research at UBS Financial Services, on a visit to Chattanooga's local UBS office.

"If we want the housing market to recover, we need a climate that builds jobs," Reiman said. "Right now you've got kids graduating from college who can't find a job, so they've moving back in [with] their parents."

Grayson, however, placed blame for short-term housing woes squarely in the lap of the lending community.

"The lending community needs to return to sensible standards," Grayson said, a statement echoed by Chattanooga Area MLS President Dan Griess.

"More than 160 lawmakers in the House of Representatives agree with us that rules requiring a 20 percent down payment will make it harder for credit-worthy borrowers to get homes," Griess said.

But as with the housing crisis that precipitated the nationwide economic meltdown, putting consumers in homes they can't really afford has its consequences, Reiman said.

"It's when you provide perverse incentives that you run into these problems," he said. "Getting people back into jobs is what really reinforces housing formation."

Right now, however, the U.S. has a nine-month supply of housing, or about 3.72 million unsold dwellings, according to the Associated Press.

Contact staff writer Ellis Smith at esmith@timesfreepress.com or 423-757-6315.