Local real estate market slumps

Local real estate professionals often describe the Northeastern Pennsylvania housing market as steady. While sales contracts and prices recently zoomed sky high in hotspots like Las Vegas and Miami, only to sink under the weight of tapped-out buyers, here the shifts tend to be moderated by a stable population and restrained spending.

But that doesn’t mean the region has completely escaped the current housing downturn, as sellers and buyers adjust to a new reality that includes slowing sales and less liberal mortgage lending.

Figures provided by the Greater Wilkes-Barre Association of Realtors show that residential property sales by member agencies dropped 13 percent in 2007, to 2,177 deals closed, compared to 2,506 the prior year. All real estate sales, including land and commercial properties, fell a bit more steeply, about 15 percent, said Kevin Smith, past president of the association and its multiple listing service chairman.

While he’s not happy about selling fewer houses, Smith said it’s important to keep the year in perspective.

The rate of decline in sales volume matches the National Association of Realtors’ expectation for existing home sales nationwide last year but is much steeper than the Pennsylvania drop of roughly 3 percent.

Local prices behaved better, with the average selling prices edging upwards, if only by 1 percent, to $139,200 from $137,900, Smith said. That compares to a projected 2 percent slump nationally, to $217,600.

“We’re not seeing an overall reduction in the value of properties,” said Smith, broker/owner of the Century 21 Smith/Hourigan agency. “I think this is better news than people are portraying.”

Average selling prices have continued to climb more steeply in some parts of the local market, according to the MLS figures. While 2007 unit sales fell 20 percent in the Back Mountain, the average price rose 11 percent, to $228,000. The Mountain Top area behaved the same, with 19 percent fewer deals but an average selling price of $240,000.

Home sales fell 11 percent in adjacent Lackawanna County last year, but the average selling price spiked by 10 percent, reaching $157,040, according to the Greater Scranton Board of Realtors. The group’s MLS system also serves Wyoming and Susquehanna counties; when they are included the sales decline was 9 percent while the average price was $133,000, a 3 percent rise.

In a reversal of a decades-long trend, both sales and prices rose in the city of Wilkes-Barre. Smith said 372 deals closed in 2007, slightly higher than the 363 in 2006, and the average sale price went up 8 percent, to $67,700.

Darren Snyder, president of Marilyn K. Snyder Real Estate, with an office in the city, said affordability and convenience are two factors driving buyers to look for homes downtown.

“I have a lot of younger buyers who see how much more home they can get in the city,” he said. The Parsons and Miners Mills sections are particularly hot right now. “That’s a very sought-after area.”

Snyder said investors from outside the area also are taking notice, buying single and multi-family houses, fixing them up and then either renting or reselling them.

“It’s so rare that you can find homes for under $100,000,” Snyder said. “I think it’s a trend we’re going to see over the next couple of years.”

He’s even seen families and “empty nesters that like the convenience of the city” sell their suburban homes and move to Wilkes-Barre.

Robert Neher fits neither description, but he’s looked at about 10 potential houses in the past two months. On Wednesday, Snyder was showing the single 25-year-old a stately two-story on Amherst Avenue in South Wilkes-Barre listed with an asking price of $84,900. A renter in Kingston, the bank branch manager understands the advantages of ownership.

A gloomy prognosis

Austin Jaffe, Ph.D., chairman of the Department of Insurance and Real Estate at the Smeal College of Business at Penn State University and consulting economist to the Pennsylvania Association of Realtors, said housing activity in the state typically lags six to nine months behind national markets.

“The prices continue to go up,” Jaffe said, “but the prices were lagging behind.

“Once you account for a lag, Pennsylvania is following the trend,” he said, although volatility is lower.

“Wilkes-Barre did not experience any difficulty in the beginning” of the housing crunch, which Jaffe said was the middle of 2006. “None of the economic data has been very good since then.”

He is not optimistic for strengthening in the near term, predicting continued sluggish sales and a further 10-15 percent decline in national average house prices this year. He expects less of a drop in Pennsylvania, and acknowledges, “it could be there are local conditions which buck the trend.”

“This is not about the unavailability of credit,” he said, but has to do with a credit crunch for borrowers with bad or near-bad credit, who contributed to several years of soaring sales numbers but no longer can get mortgages.

Neher, Snyder and Bob Kopec, an agent at Humford Realty in Wilkes-Barre, all agree that loans are still readily available to qualified buyers.

“If you have decent credit, you’ll get a loan,” Kopec said. “Not perfect, but acceptable.”

One of his clients recently financed the full cost of a house, unusual now but common in the easy-money days from 2002-2006.

Always a market

“This is a fairly stable market,” said Alvin “Buddy” Rothstein, broker/owner of Rothstein Realtors. He’s seen plenty of cycles during 45 years in the business.

“There are some ups and downs, but not sharp peaks and deep valleys,” he said.

Rothstein sees “good stuff on the horizon” that will lead to more growth, such as new businesses moving into the CenterPoint Commerce and Trade Park at the northern end of Lackawanna County. His Quail Hill development nearby is approved for 650 dwelling units, including 139 single-family homes.Kopec’s 35-year real estate career provides some perspective on changing market conditions, and he is not discouraged.

“I sold real estate when interest rates were 16 percent,” he said. “There’s always a need to sell and people always have the desire to buy. There will always be a market.”

He believes one moderating force in the local area is the small number of speculative buyers, who hope to “flip” a home for a quick profit. That approach has been disastrous in places like Miami, where a large share of condominiums are now vacant, even as developers continue to build more.

Kevin Smith said he’s seen an increase in potential buyers since the holidays and hopes it continues. Historically the first half of the year is busier than the second half. “I know by June whether we’re having a good year or not,” he said.

Pointing to the steady or rising sale prices, Smith cautions buyers against thinking they can get a bargain. But he also urges his agents to impress on sellers that asking too much will delay or block a deal.

Snyder said buyers, sensing a stronger position, have become more picky. That makes them reluctant to buy a house that needs extensive remodeling, and he advises sellers to update before putting their home on the market, particularly in the kitchen.

Area REAL ESTATE SNAPSHOT

According to figures provided by the Greater Wilkes-Barre Association of Realtors:

• 2,177 residential properties changed hands in 2007 in the group’s Multiple Listing Service area, which is Luzerne County except the Hazleton area. That was a decrease of 13 percent from 2006 and comparable to the national average.