COVINGTON --It may not feel like it now, but there are signs that the residential real estate market may be stabilizing, according to some professionals.
Kenneth Harper is a Realtor with Keller Williams Realty who serves Rockdale, Newton, Walton and Henry counties. He is also president of Crosspointe Property Solutions, Inc., a consulting company that assists banks, builders and developers with market research, analysis and strategic planning services.
He said after reaching a low point in late 2010, housing prices appear to be stabilizing. Harper explained that at the point when the market in Rockdale and Newton counties was the most imbalanced, there was 11 to 13 months' supply of homers in the market place. In other words, if no new buyers came into the market, it would take about a year to sell the existing inventory.
"Now we're at about a five- to eight-months' supply," Harper said, pointing out that when inventory is more than eight months, it's a buyer's market and when inventory is under a five months' supply it is definitely a seller's market.
He said inventory that doesn't move now falls broadly into two categories.
"You've got those homes that are priced too high because the seller just can't lower it any further or old inventory that is not in good shape that no one cares to buy," Harper said.
For those who need to sell their homes, he said, this time is better than it's been in three years.
"There's less on the market to compete with, so there's a window of opportunity; we're just not sure how long that window will remain open," Harper said.
He said that the dark horse in the equation is foreclosures.
Harper said the number of foreclosed properties has declined over the past year, but whether that will increase again is anyone's guess.
"In 2011, banks took back 20 to 35 percent fewer foreclosures each month, and inventory on foreclosures is down considerably from their peak in 2010," he said. "The real question is whether there's an actual change in the number of foreclosures or whether banks are simply being overly cautious in filing the paperwork."
At the end of 2010, when the foreclosures started to slow down, Harper said, many banks halted foreclosures due to "robofiling" issues where many people's homes were erroneously foreclosed due to improper filing procedures. Furthermore, many large mortgage lenders, including Fannie Mae and Freddie Mac, announced at the beginning of December they would not pursue foreclosures during the holiday season.
The overall high number of foreclosures -- which Harper believes is due almost exclusively to subprime loans that enticed people who were not financially equipped to take out mortgages for homes they could not afford -- is the main culprit for depressed home prices in Rockdale and Newton counties.
Harper said the local market peaked around the first quarter in 2007.
"From then until now, the average sales prices in Rockdale are 50 to 55 percent less and in Newton, they are 60 to 65 percent less," he said.
In other words, he said, a home in Rockdale County that was worth $220,000 five years ago is now worth closer to $110,000.
In Newton County, a home valued at $175,000 in 2007 would be valued around $70,000 today.
"Western Newton County was hit worst, mostly because they had the most starter homes and the most new construction and the largest percentage of subprime loans and therefore, the highest number of foreclosures," Harper said.
In Rockdale County, he said, older homes, those built before 1995, are causing the biggest drag on home prices.
Harper said while he sees signs of positive movement in the market, it will be a long road.
"When prices fall, they fall rapidly; when they recover, they recover slowly," he said. "What we're experiencing now is the new reality. We're not going to see any major market shift in growth until the economy recovers and unemployment drops. ... My advice is don't put your life on hold for money that won't return."