Foreclosures drag down prices

Existing-home sales drop 16% in 2008!

Home sales and prices continued to tumble in 2008 as a third year of housing market corrections ran their course in Greater Cincinnati and Northern Kentucky.

Existing-home sales dropped 15.8 percent in Greater Cincinnati last year compared to activity in 2007, while in Northern Kentucky, sales were off 14 percent, according to reports released Monday by local boards of Realtors.

Nationally, sales declined 13.1 percent over 2007 – the slowest sales activity since 1997, the National Association of Realtors said

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“The numbers are a bit sobering, but expected,” Johnny Hodge, president of the Northern Kentucky Board of Realtors, said. “We’ve absolutely noticed a tightening in credit and lending standards, which ultimately is a good thing, but we think the pendulum has swung a bit too far, and some parameters are so strict there is some overcorrecting going on.”

Experts also say the housing market continues to be thrown out of balance by an excess supply of lender-owned and foreclosed properties.

The impact is felt most heavily in sales prices, which have been dragged down as lenders move aggressively to shed troubled real estate from their portfolios.

“Take out distressed sales, and we had a pretty good market last year,” Paul Jacob, president of the Cincinnati Board of Realtors, said.

In Greater Cincinnati, the average sale price fell last year by 6.7 percent to $162,340, the Cincinnati Realtors reported. The median price – which is the point at which half the homes sell for more or less – fell 20 percent to $102,513 in December compared to the same month in 2007. A median price was not available for the full year.

Pricing was less affected in Northern Kentucky.

The average sale price remained relatively unchanged at $160,611, and the median price for the year dropped 3.3 percent to $132,324, according to Northern Kentucky Multiple Listing Services data.

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Nationwide, the median price last year was $198,600, down 9.3 percent from $219,000 in 2007. The decline was the biggest since the national Realtors began keeping records in 1968, and experts said it’s probably the biggest drop in seven decades.

The sales report did contain good news. Sales in Greater Cincinnati rose 8.4 percent in December compared to November as more buyers entered the market to take advantage of low interest rates and favorable prices.

“Mortgage rates are on sale right now,” Jacob said, adding that the recent rates, which have hovered around 5 percent to 5.5 percent, are the lowest seen since 1963.

While the December sales spike was encouraging, experts said they don’t think that it indicates we’re at the bottom of the correcting market.

Local officials said the inventory of unsold homes in Greater Cincinnati remains high, with a 10-month supply of houses. The figure – which is down considerably from 2007 levels – represents the amount of time needed to sell all of the homes currently on the market.

The excess inventory is an advantage for prospective buyers – but it’s still indicative of an unbalanced and correcting market, Jacob said. A balanced market – one that is competitive for buyers and sellers – has a six-month supply, experts say.

“We’re still going through the equation of supply and demand,” Jacob said. “When the supply numbers come closer to demand numbers, you will see a more stable real estate market.”

Meanwhile, local home builders continued to be hit hard last year by the declining market.

In Southwest Ohio, permit activity for new single-family home and condominium construction fell 39 percent last year over 2007, according to Home Builders Association of Greater Cincinnati.

Northern Kentucky saw a 31 percent drop for the year, the Northern Kentucky Home Builders Association reported.

“Builders are trying to diversify as much as possible,” said Dan Dressman, executive vice president of the Northern Kentucky HBA. “I’m not sure anyone knows what’s around the bend. We’re just taking it one day at a time and maximizing opportunities that do come our way.”

The New York Times contributed.