If there’s one message Kentucky’s Realtors and home builders are trying to emphasize, it’s that all real estate markets are local, and that Kentucky isn’t Florida, California or Nevada. While plummeting home prices, lingering inventories and skyrocketing foreclosure rates in those states have made national media headlines for months, Kentucky’s real estate market, while in a slowdown, has fared better than the national average on most indexes.
In an attempt to counter dismal news of flailing markets in other regions of the country, the Kentucky Association of Realtors (KAR), the Home Builders Association of Kentucky (HBAK) and their regional associations have launched aggressive marketing campaigns to share details of the Kentucky market’s relative steadiness. They hope it will help lure hesitant buyers back into the hunt for a new home.
“Each office is doing its part to educate clients that Kentucky is not California. Kentucky is not Boston,” said Diane Ruby, executive officer of the Ashland Area Board of Realtors. “You know, we are holding our own, and things are going good here.”
“We have everything in play to have a good housing market” in Kentucky, agreed Robert Weiss, executive vice president of the HBAK. “In my mind what it’s going to take is for the consumers to get a little confidence and not listen to the national news but listen to what’s going on in Kentucky.”
Local Markets
Existing home sales were down 22.7 percent nationally in March 2008 compared to March 2007, according to the latest statistics of the National Association of Realtors (NAR) available at press time. Statewide figures for total homes sold were down “similar to national percentages” for the same time comparison, said Robert Damron, president of the KAR.
Statewide, median home prices for existing homes were down 1.8 percent in March 2008 compared to March 2007, while nationally the decline was 7.7 percent, Damron said.
Some local markets fared better than others.
In the Louisville area, the median home price for the first four months of 2008 was down about 2 percent compared to the same time frame in 2007, and the number of homes sold during that period was down 18 percent, said Patricia M. Edison, director of the KAR Region 3, the Greater Louisville Association of Realtors.
The KAR Region 1 (which includes Hopkinsville, Mayfield, Madisonville, Owensboro, Murray and other cities) did better. The median home sales price was up $10,000 to $15,000 in March 2008 compared to March 2007. The number of homes sold was down about 4 percent, and average days on the market for a property was about the same at 90 to 120, said Larry Gillette, KAR Region 1 director.
In Paducah, sales have been relatively steady, with only 12 fewer houses sold in the first quarter of 2008 compared to the first quarter of 2007. Average sales prices there actually increased by 5 percent and average days on the market are down 13 percent during that time frame, said Carl Adams, president of the Paducah Board of Realtors.
The 13 counties served by the Eastern Kentucky Association of Realtors (including Pike, Breathitt, Floyd, Harlan and Wolfe) witnessed a record year in terms of number of homes sold in 2007, said President Brenda Gooslin. This year, sales in the area have been somewhat hindered by tightened lending restrictions, she said.
In the Bluegrass region, the existing-home median sales price was down 4.3 percent in March 2008 compared to March 2007, and existing-home total sales were down 17.8 percent, according to Judy Craft, president of the Lexington-Bluegrass Association of Realtors.
While numbers are down in some regions, the onset of the summer sales season brings many indicators that point to an optimistic outlook for Kentucky’s real estate market in the final months of 2008, Craft said.
The NAR also expects an upturn. It anticipates sales of existing homes to rise from an annual pace of 4.95 million in the first quarter of 2008 to 5.82 million in the fourth quarter. Total sales in 2008 nationally will top roughly 5.39 million, and then rise 6.1 percent to 5.72 million home sales next year, according to a May 7 NAR estimate. The NAR’s U.S. Economic Outlook released in April projects national existing home sales in the first and second quarter of 2009 to exceed sales in the first and second quarters of 2008 by 21 percent and 15 percent, respectively.
“We’re seeing a lot of traffic at our open houses. We are seeing multiple offers coming in, which we haven’t seen for a while. … Our days on the market are starting to diminish. Our inventory is diminishing. We really expect to see the third and fourth quarter of 2008 start to stabilize, and then the beginning of 2009, I feel like we’re going to be in a much better position,” Craft said.
The Hopkinsville and surrounding areas anticipate a doubling in their home sales in October through December of this year, said Gillette, when soldiers with the 101st Airborne return to the nearby Fort Campbell Army Post from their Iraq and Afghanistan deployments.
No Bubble Here
While the total number of existing homes sold in Kentucky was down 5 percent in 2007 from 2006, Kentucky’s median home sales price actually increased overall in 2007 by almost 2 percent, Damron said.
“Home prices in some other states went up so fast and so quick that a correction had to occur,” said the HBAK’s Weiss. “But in Kentucky, home prices have risen on average about 3 percent a year, and they’re continuing to rise. The old saying that a home is a good investment still stands in Kentucky, because we didn’t see a drastic increase in price, so we’re not going to see a drastic decrease.”
“It’s a great time to buy,” agreed Edison. “Interest rates are still near historic lows. There is a great selection of homes available, and real estate continues to be a wise investment.”
Kentucky’s low foreclosure rate is another factor bolstering the real estate market here. With one foreclosure for every 2,733 homes, the commonwealth ranked 38th nationally in foreclosures in March, according to RealtyTrac, a national foreclosure information service. In comparison, Nevada led the nation with one foreclosure filing in March for every 138 households. Closer to home, Ohio ranked seventh in foreclosures with one filing for every 448 households, and Indiana 11th with one filing for every 538 households in March.
New Housing Market
Nationally, the Commerce Department reported that the construction of new homes fell in fall 2007 to 14-year lows. In Kentucky, building permits for new homes were down approximately 47 percent in the first quarter of 2008 compared to first quarter 2007, according to statistics from the U.S. Census Bureau Building Permit Survey.
Total projected housing starts for 2008 are in the 17,000 to 18,000 range across the state currently, said Weiss, compared to an all-time high of 23,000 three years ago.
Alongside construction declines, sales of new homes have lagged as well. The NAR projects sales of new homes nationally to continue to fall by 30 percent this year before rising 10.1 percent in 2009, according to a May report.
“Kentucky overall is not in as bad a shape as several other areas of the country [in terms of new construction], particularly Florida, California, Arizona, Michigan and Ohio,” said Neal Tong, president of the HBAK. “They’ve been hit a lot harder than we have. I’m optimistic,” Tong added. “I just can’t believe that things will continue to get that much worse.”
Both Tong and Weiss noted that as long as interest rates remain around historic lows of 6 percent, the current construction slowdown will not become as severe as the one experienced in the late 1970s and early 1980s, when interest rates hit 18 percent.
“In one instance, you can say it’s a downturn. But on the other hand, there’s lots of anticipation that when consumers who are looking at the possibility of buying or building a new home realize what’s out there and what interest rates are available, and that they’re not going to get much better than this, then they’ll start coming out and getting back into the market,” Weiss said.
Great Time to Buy
While some homes have lingered on the market for months during the real estate slowdown, Conrad Wong and his family sold their home in Lexington’s desirable Beaumont Reserve neighborhood in less than 30 days.
The secret: aggressive pricing. Faced with a move to Indianapolis to accept a new job with Eli Lilly, Wong priced his home roughly $10,000 to $15,000 below market value. The result was lots of traffic: roughly one showing a day, he said.
“There’s a ton of inventory on the market right now, so you have to ask yourself how serious you are in wanting to get rid of your home,” Wong said. “We were in a very fortunate situation where we could be aggressive in our pricing.”
Given the ample inventory in the Indianapolis market, Wong found it to be a great time to buy. “It’s a buyer’s market,” he said. And the savings he recouped on the purchase of his new home in Indiana, given the slower market and subsequent lower relative prices, roughly offset what he gave up in the price of selling his home.
“It balances out,” he said. “It really does.”
Robin Roenker writes
for The Lane Report.
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