Ever the optimists, Capital Region Realtors say interest in the residential market is increasing, showings are up and more homes are under contract compared to last year.
But sales in the first quarter trail the dismal numbers posted in 2010, inventory remains high and buyers are still cautious.
In this climate of optimistic uncertainty, Realtors say, the difference between homes that are selling and those sitting on the market comes down to three factors. Of course, the adage about location continues to ring true, and price always plays a role.
Along with those market forces, a new trend is emerging among house hunters.
“Buyers these days are just unforgiving when it comes to having to do any renovations, but they’ll pay top dollar for a home that is completely updated and move-in ready,” says Paul Burns, president of Burns & Co. Realtors. “The houses that are staying on the market are those that are not updated and not priced accordingly.”
Buyers are a little more forgiving on homes that need a little TLC but are located in high-demand areas such as the Garden District, Spanish Town, Southdowns and select suburbs, he says. Otherwise, they just aren’t willing or able to compromise.
A number of circumstances are playing into the trend, Burns says, including generational differences, limited access to cash, high inventory, the end of the flipping phenomenon and pop culture.
The newest generation of homebuyers grew up in the drive-thru age and is busy balancing personal and professional responsibilities, he says. As a group, these people lack the ability to put their elbow grease into a renovation, and they don’t want to hassle with a contractor.
But it’s not only a hectic schedule that has them—and also members of older generations—hesitant to purchase a fixer-upper.
“They don’t have the time, but more important, they just don’t have the money,” says Laura Smith, a Realtor with The Partners Team at Re/Max First. “Interest rates are so low that it’s really not going to change their mortgage if they pay a little more on the front end for a move-in ready home.”
Not only are there a number of new homes on the market, she says, there also are a lot of move-in ready homes available. And because appreciation has slowed to a trickle and equity has all but dried up, flipping no longer is a viable business venture.
“There is no such thing as flipping anymore,” Burns says. “If you’re going to try flipping, you really better know what you’re doing because there’s a lot of risk involved.”
Last but not least, he says, the influence of home improvement-themed television shows has played a role in the sale of move-in ready homes. HGTV shows that feature renovations, including Bang for Your Buck, which filmed last month in Baton Rouge, have created a more savvy, style-conscious consumer.
“Because of the exposure they have to these kind of shows, their expectations are higher,” he says. “They also get to see what really goes into a renovation through these shows, and they see it’s not easy or cheap.”
Smith is featured in the local Bang for Your Buck episode, which will air later this fall, and showcases three homeowners who renovated the same room in their homes with the same budget. The episode follows Smith and an interior designer as they determine the new value of each home and discuss good and bad remodeling decisions.
For sellers who might consider putting a little money into their homes to increase interest, she suggests starting with the kitchen.
“Normally the kitchen is what’s going to sell the house, especially in this area, where people do a lot of entertaining in the kitchen,” Smith says. “It’s the most expensive area to update, but it’s the place where you’ll get the best return on your investment.”
If a wholesale renovation isn’t available, Burns says, sellers should—at the very least—apply a new coat of paint, put down new carpet and keep the home extra clean.
“It just makes all the difference in the world,” he says. “I tell my clients, ‘You can’t think of this as your home. This is not your home anymore. This is a stage.’”
More homes that are not move-in ready likely would sell if their owners were willing to come down on the price, Smith says. Though many sellers also are looking to buy a home at a good price, she says, they aren’t as likely to consider dropping theirs.
The average sale price dropped to $186,370 in the first quarter, according to RealtyTrac. While that’s a 6.3% drop from the previous quarter, it’s roughly even with the average price in 2009.
“Especially houses under $200,000, they really haven’t dropped in price at all because that’s where the market is,” she says. “Homes in the $200,000 to $600,000 range are a little slower, and some of those sellers are going to have to get more realistic in pricing.”
On the bright side, steady prices are evidence of the Capital Region’s resilience during the recession. And with the best months for home sales just around the corner, Realtors have good reason to believe that 2011 eventually will outpace 2010.
“There’s really been renewed enthusiasm in the market,” Burns says. “If homes are priced right, they’re not staying on the market quite as long. We’re not seeing it in the numbers yet because the deals haven’t closed. We’ll probably start seeing better numbers for March and April, and I think the rest of the year will be better than 2010.”