Springfield Business Journal Executive Editor Christine Temple discusses the residential real estate market with Adam Johnson, broker and co-owner of Alpha Realty; Art Maxwell, broker and co-owner of AMax Real Estate; and Jeff Parker, managing broker with Murney Associates, Realtors.
An excerpt from the start of the podcast follows.
Christine Temple: Let’s start with the 30,000-foot view. So, it’s summer, we’re five years post-pandemic, we have uncertainty in the market. There’s lots of things happening, but people still need somewhere to live. How would you gauge the industry right now?
Jeff Parker: I’d gauge it as chugging along, not in dire straits at all. There’s a lot on the sidelines waiting for rates to do what we expect they will do, but we’re about even with last year.
Adam Johnson: I’d agree as far as it’s balanced, about the same, little over maybe last year, but about the same as numbers from last year.
Art Maxwell: The market’s significantly the same. It has been for the past three or four years. Actually, COVID was a little bit better, the COVID years, because people needed homes and the rates were lower, so a lot more people bought during that time. I think we’re in a soft sellers market still. I look at the absorption rate, how long does it take to sell your inventory. If you have a low absorption rate, if you can sell all your inventory in two months and right now ours is about two and a half months, then that market seems to favor the sellers because listings are still selling. If the absorption rate gets over six months, say eight or 10 months, then you know that the rate of sales has slowed and then it favors the buyers. One of the things Jeff was saying, people are waiting for that rate change, well one of the dangers with that is when the rate changes everybody wants to get into the houses. Then you have all of the multiple offers and then you have over-asking price going on. If you have to buy, buy now. If the rates come down, you can refinance down. But what if they go up?
Temple: Do you think consumers are heeding that advice or is the uncertainty just making them kind of feel like, I don’t know which way to go?
Maxwell: If people can wait and they want to wait, then they’ll do that, but the other people can’t wait. I mean, if you have to have your kid in this school district by this time, you have to make a purchase decision and those decisions are still being made. We’re still listing about 500 homes a week. Last week … we went under contract on 100 homes less than what we listed, but that’s a pretty robust market. We’re right in prime selling season. I expect through October for the market to be just like this and maybe even better.
Parker: Inventory is climbing gradually. There’s a segment of the market that’s married to their existing rate. They don’t want to sell their house. But like Art says, that if you have to buy a house, you’re going to purchase a house, and now is as good a time as any. Prices have increased since last year. They’re holding steady, but average sale price was higher, median sale prices are higher. Anybody who might say that, well, you’re going to see a big decrease in prices as inventory climbs. That’s not what we see or expect.
Temple: Just to do kind of a quick market snapshot: The latest data from the Greater Springfield Board of Realtors is in May, there was a 12% increase in units sold, slight growth in the (average) sales price to $285,000 in our market. But we did see a pretty significant increase in days on market. It went to more of that two month range from more of a one month range (year over year). Sounds like there’s a lot of factors that are still kind of up in the air as to where that might trend. Do you see us getting into any more of a buyer’s market?
Maxwell: Not right now, no. I mean there’s just no inventory. We haven’t been building enough homes for the demand that’s coming, for the demand that’s already here. Without building new units, without increasing the inventory that way — it’s hard to do. After the correction in ‘08, the banks got a little skittish about lending money. So everybody is kind of trepidatious about the lending, but we need more units, we need more building in this area, and I think that’s nationwide. The prices are going to continue to go up as long as there’s a demand for the houses, and there’s not going to be a surplus in this marketplace that I can see for some time.
Parker: Our market has always been insulated from a lot of the highs and lows of the major metropolitans, but as Art says, we’re low on inventory, no matter how you look at it. And builder sentiment — I don’t think it’s negative in our market. I think builders are trying to build everything they can build that they’re comfortable in selling, but I think they’re conservative, No. 1, and No. 2, the cost of land has increased, cost of development has increased. So you’re seeing mixed use. Like a couple of developments that are being proposed now, they include multifamily, they’re surrounded by single family, because a developer has to do that because of the cost of building that infrastructure for the subdivision.
Johnson: Traditionally our market has just been single-family homes and builders are having to get creative and do multifamily and commercial and everything mixed in one development just to make the numbers work. Because like what Jeff said, the cost just to get a house started is pricing a lot of buyers out of the market.
Maxwell: There’s also structural issues sometimes. If you have planning and zoning that’s not easy to deal with, then the builders will go to other places. We have a lot of builders that won’t build in Greene County because they have difficulty because the building standards are higher than they are in some of the other counties. You go to Webster County, and you could build a home for less money than you can here. So if you’re going to buy a big home and you could buy it right in Rogersville and still have the benefit of everything in south Greene County, you’re paying your taxes to Webster County, and getting all your benefits from Greene County. So if the planning and zoning could better work with builders and the people that are providing the services, it’s all the people doing your electrical work, all the plumbing work, if they could work better with those people, then more people would want to build and I think it would help. There’ll be people that say, “I will not buy in Greene County because of the planning and zoning, but the flip side of that, you know that the houses are done right, you know that they’ve been checked out properly and you know that they should hold their value. I don’t have anything against planning and zoning. I have things against the inefficiencies. So they need to be efficient so that these builders can do what they do as build and not try to jump through red tape and hoops.
Excerpts by Editor Christine Temple, ctemple@sbj.net.
