By Eleanor Kennedy
Even though Ryan Hansen and his wife had wanted to buy their own single-family home for several years, they never thought they could get what they wanted for a price they could afford.
But a few weeks ago, thanks to what Hansen called “incredibly low” interest rates, the couple closed on a home in the Oak Park neighborhood of Lynchburg.
“The actual housing prices weren’t as significant as the interest rates,” said Hansen. For buyers like the Hansens, interest rates below 3.5 percent have made for an appetizing housing market, said Will Easter, a Lynchburg-area real estate agent with Century 21 All Service.
Those low rates, combined with falling unemployment and gradually improving economic conditions, are helping to fuel a return to normalcy in the housing market in the Lynchburg area and statewide.
Data from the Virginia Association of Realtors this summer — traditionally the best time of year for home sales — showed signs of consistent recovery. A snapshot of statistics from the third quarter shows three key indicators trending the right way: Home sales are up, time on the market is down, and prices have risen.
“Everything is showing very positive signs,” said Easter, who’s been a Realtor since 2004. “There seems to be confidence in the market.”
Foreclosures also are falling both nationally and statewide. The commonwealth had 2,110 foreclosures in the third quarter of 2012, more than an 80 percent drop from the same period last year. The dramatic drop in Virginia’s foreclosures began in the fourth quarter of 2011, when that total fell almost 26 percent quarter to quarter, and has continued throughout the year.
In the Central Virginia region, which encompasses Lynchburg, Blacksburg and Roanoke, foreclosures dropped almost 64 percent from the third quarter of last year to this one, according to the Virginia Association of Realtors.
Foreclosures increased slightly in the Lynchburg metropolitan statistical area from last year to this one, but there are still more than 60 fewer foreclosed homes in the area than there were at this point in 2010, according to Realtytrac.com.
Because the Lynchburg area wasn’t hit as hard as the rest of the commonwealth and the country by the housing crisis, recovery has been swifter and stronger here, said Wendy Knott, president of the Lynchburg Association of Realtors.
“We weren’t impacted as negatively as the rest of the U.S. was,” Knott said. “We were not as drastic, so that’s good for us. When we start recovering, we don’t have as far to go.”
Lynchburg-area home sales increased 11 percent in the third quarter, up from 507 to 565, according to data from the association’s master listing service. Average days on the market dropped 19 percent, from 139 to 113. Prices averaged $179,200, a 2 percent increase from the third quarter of 2011.
The market is especially attractive for people looking to buy, Knott said, but there are positive signs for sellers as well.
Along with the falling number of days on the market, she said, sellers are getting offers around 97 percent of their list price, an improvement over the third quarter last year. And most sellers are simultaneously buyers, meaning they’re able to take advantage of the same attractive interest rates when looking for their new home.
“It’s not a bad time to sell by any means,” Knott said.
Former Lynchburg resident Brad Saunders didn’t get exactly the price he wanted when he sold his house in Lynchburg. But, he said, “nobody is.”
“We got as close as you could get in the way the real estate market is,” Saunders said. The most important thing for Saunders, who sold his house and moved to Texas at the end of September, was to close the deal quickly.
Still, sellers are faced with a market of buyers “looking for a steal,” said Mike Seiler, director of the Institute for Behavioral and Experimental Real Estate at Old Dominion University.
“They’re thinking… ‘I want a crazy good deal on the house that I buy,’” Seiler said.
Conditions are more challenging for those who bought their homes at the height of the housing bubble, particularly in places like northern Virginia.
The market is over-correcting right now, said Ted Koebel, senior associate at the Center for Housing Research at Virginia Tech. After the bubble market of the mid 2000’s vaulted prices 15-20 percent above homes’ actual values, he said, prices have now fallen far below where they should be.
“We haven’t even returned yet to what we think will be the new normal for housing finance,” he said.
Eventually, Koebel said, the market will even out. That may not be good news for those who bought their homes five to 10 years ago, though; they’ll probably never get back the price they paid.
“If somebody’s out there expecting that we’re going to return to 2007 bubble prices, they’re not going to sell their house for a good long period of time yet,” he said.
But for those who’ve owned homes for 20 years, the value of their home will eventually normalize and they’ll be able to recoup their investment when they sell.
“You’re going to see a price correction,” Koebel said.
That cycle of boom, bust and return is something long-time homeowners will understand, but it may scare away perspective homebuyers, Seiler said.
For those who came of age during the housing crisis, he said, home buying no longer seems like the great investment it once did.
“I think you’re going to get the response that it’s a terrible investment,” Seiler said, adding that young professionals and potential buyers are likely to gravitate towards renting, at least for the time being. Even some perspective buyers in their 30s may rent longer than they would’ve in the past, he said, until they can be certain buying a home is worth the money.
“For the people who have a choice I think the answer is more toward the renting side,” he said.
But Koebel said that perspective — viewing home buying as an investment — is the wrong mindset to have. The decision to buy a home should be based on the property’s cost, location and fit in your life.
“They should never be looking at it as, ‘my decision is an investment decision,’” he said. “They find themselves at a point in their life where they’ll be in the community for longer and they’ve got a steady job and buying starts to make much more sense for them than renting.”
Plus, Knott said, while interest rates stay low, home buying may be the more affordable option than renting.
“Right now what you can get for a rental payment, you can pretty much get for your house payment,” Knott said.