Area’s mid-year home sales reflect continued struggle

A house for sale in the Northfields neighborhood of Albemarle County was priced at $495,000 in April 2007 and languished unsold on the market for two years.

Earlier this year, the owner slashed the price by upward of $100,000 while also investing in improvements such as a fresh coat of paint, new carpet and more.

It sold in May. The final price: $380,000.

The house in Northfields underscores the difficult choices many home sellers are facing in the Charlottesville region’s real estate market.

According to the Charlottesville Area Association of Realtors’ mid-year market report — which will be released today — far fewer homes listed at more than $300,000 are selling.

From April 1 to June 30, there were a total of 613 homes sold in Charlottesville and the counties of Albemarle, Fluvanna, Greene, Louisa, Nelson and Orange. Of these, roughly two-thirds sold for less than $300,000.

The surge in the lower end of the market is due in part to the $8,000 tax credit for first-time homebuyers and to relatively low mortgage rates, real estate agents said.

“We’re seeing first-time homebuyers moving into the market,” said Barbara McMurray of Montague, Miller and Co. “They’re coming out to open houses. They’re asking about the tax credit.”

While there has been increased interest in the region’s more affordable homes for sale, the market saw a sharp overall decline during the first half of 2009.

According to the report, the total number of homes sold in the Charlottesville area was down by one-third compared with the first half of last year. From Jan. 1 to June 30, there were 958 homes sold in the area, down from 1,324 during the same period in 2008.

The sharpest decline was seen in Orange County, which saw its number of homes sold cut in half. The smallest drop in home sales was in Albemarle County, which was off by 15.6 percent.

One fundamental problem, real estate agents say, is the area’s excess of available homes.

“The bottom line is, the inventory is still pretty significant,” said Michael Guthrie, president of CAAR.

There are currently 3,602 homes for sale in the region, slightly lower than the 3,761 homes for sale at the mid-point of 2008. “This small decrease from last year is a positive sign, but we have a long way to go before we see the appropriate inventory levels in the 2,000 to 2,500 range,” the report says.

Guthrie pointed out that the increased sales activity among homes priced below $300,000 is not helping the market as much as it might, as many lower priced houses are vacant.

As a result, these sales are having little to no effect on the so-called “move up” market, in which families sell their existing home and move into a more expensive house.

Guthrie believes that the market is showing some positive signs, but it will not truly improve until maybe the end of the next year. He doubts that there will be any measurable appreciation in price before the end of 2010 or 2011.

“I don’t think this struggling market is over, but I do feel encouraged,” he said.

Are sellers, such as the one in Northfields, dropping their homes’ prices? The answer, according to the market report, is yes.

“Based on the data from the CAAR MLS, we believe that the numbers clearly show a significant decrease in home prices,” the report says.

The area’s median sales price slid by $22,900 (minus-8.5 percent) compared with the first half of 2008, according the report. The sharpest declines in median sales price were in Orange (minus-29.7 percent), Fluvanna (minus-19.6 percent) and Louisa (minus-20.8 percent), whereas the median prices in Charlottesville, Albemarle and Greene fell by substantially less.

Yet, the report notes, the increased number of homes that sold for less than $300,000 is a major reason behind the drop in median sales price.

Real estate agents say the key to selling a house, even in such a slow market, is to set the “correct” price.

In the case of the house in Northfields, the owner sought the advice of Mike Peters of Roy Wheeler Realty Co. to figure out why the property had not sold in two years. Peters researched similar properties and found that the price needed to come way down if it was going to sell.

“My father told me, ‘Property that’s priced right is half sold,’” he said.

Jason Bacaj contributed to this story.