Homes selling for the asking price, some before even hitting the market. The Central Kentucky housing market seems alive and well in this post-recession economy, but have lenders loosened purse strings to make credit more readily available especially to young adults just starting a lifelong experience of homeownership?
Listen to Tom Martin's interview with Al Blevins on Lexington's commercial real estate market.
Listen to Tom Martin's interview with Richard Hopgood on Lexington's commercial real estate market.
Interviews recorded at Dynamix Productions in Lexington (http://www.dxaudio.com/)
Tom Martin spoke with Al Blevins, president of the Lexington Bluegrass Association of Realtors, about trends, dynamics and Bluegrass-area residential sales.
Tom Martin: Sales volumes and median price are up, average days on the market, down. It was not long ago when the news was not this encouraging. Could you bring us up to date?
Al Blevins: The overall activity that we've seen every month, just as you said — and it started in the fall of last year — has increased double digits, 22, 25, 26 percent. Prices are up, and appreciation is exceeding what the economists had projected and forecasted. The days on the market: very true here in Fayette County. The multiple offers that are coming in, open houses that are being scheduled and they never meet that date because there is already an offer and an acceptance contract on it.
Realtors are staying very busy, phones are ringing, a lot of showings, a lot of foot traffic. Websites are being hit. For example at LBAR.com, there are over 300,000 hits per month. A lot of those are shifting into mobile devices. So people are out there with their iPhones and looking at homes and calling realtors immediately and want to see homes. So it's an interesting time. It's a fun time. We are staying very busy.
Martin: Are you finding that the mobile technology changes the nature of operating as a real estate agent? Are things moving faster out there?
Blevins: The Realtors are having to keep on their toes. When someone is out in the neighborhood and they bring up a listing or they see a house for sale, they want immediate response. And if they call your phone or text you and you do not respond within a reasonable amount of time you lose a sale or a listing. So we're constantly having to brush up our technology game.
Martin: Inventory is tight. How come?
Blevins: Several reasons. One is over the last four or five years we have not had a whole lot of new homes constructed in the area, not just the area but all over the United States. And then also you have people that purchased homes that are underwater, meaning they owe more than it's worth. With the appreciation we are having here because of supply and demand they're starting to be able to put their homes on the market and we've seen a little bit of an uptick in some areas. The recent interest rate upticks — a lot of people think that's a bad thing — but really what it did was to help get some people off the fence and into the market. New home construction, it's increasing but we're behind in that area.
Martin: According to your organization's numbers, Bluegrass-area real estate sales climbed from $142 million for April this year to $174 million in May and then fairly leapfrogged, well over $806 million in June. Is that extraordinary or is that typical for this time of year?
Blevins: The warm-weather months have been typically, you have more action especially in the spring. I think it started last fall, and it's just gradually increased and depending on the rates, which are at an all-time historic low. Again going back to the rates, when I first got out of college in 1980 and went into banking, the prime rate was 21 percent. The first mortgage loan I made to somebody was 16.75 percent. So with a 3.5, 4.5, 5 percent interest rate, it's a great time to buy and sell. We're on track for about $1.6 billion in sales for the year, if you annualize. So it's ahead of the game for sure compared to the last three years.
Martin: Let's look at entry to home ownership and what's going on there today. During the recession, obtaining a mortgage became almost impossible for many people. Has that situation improved?
Blevins: It's eased up from my perspective in talking with the financial institutions. But they are still requiring more of a down payment, having higher credit scores and job stability, of course. It's usually two years, plus. So it's working its way back, but we don't know what's going to happen with the Dodd-Frank Act and some of the capital requirements that are going to be on the financial institutions.
Martin: An awful lot of uncertainty from Dodd-Frank?
Blevins: Yeah. It's a burden upon our community banks. The larger banks are able to withstand it, but for some of the smaller community banks in our Bluegrass region that are very well capitalized and have great relationships in the community, it's a burden to have to hire additional people to interpret everything to make sure they are in compliance. So hopefully that doesn't cause a lot of mergers and acquisitions of those good institutions that have helped many people buy homes and helped them with their businesses.
Martin: A lot of young people who are coming out of college with student loan debt are the children of parents who are also shouldering a lot of debt and between the two of them may not have the cash on hand to enter the market. Are there alternatives for them?
Blevins: The real estate offices are getting calls every day. Not just one or two calls but tens and twenties of people calling and wanting to rent. So our supply of rental property is low. As far as buying versus renting, it's better to buy right now if you have a little bit of a down payment and job stability. But the young people seem to be cohabitating with each other. They are putting off a lot of life events as far as purchasing a home, getting married, having children and things like that. That is a concern. They want to move downtown and have the "live first, work second" type of attitude.
We need to support and launch those young people the best we can. Many economists say that the real estate market is the tailwind to the economic recovery. You put a lot of people to work. The National Association of Realtors says that every time a home is sold it pumps about $60,000 into the economy. So it does drive the economy pretty well.
Martin: Because of the Urban Services Boundary, finding land that can be developed for apartment complexes in the Lexington, Fayette County area is pretty difficult. Developers are buying older, existing complexes, reinventing them and raising the rents — which of course displaces people. That trend does seem very apparent in Lexington right now, would you agree?
Blevins: I would.
Martin: One professional told me the rule of thumb is that the cost of rehabbing an existing complex runs about $10,000 per door versus up to $100,000 per door for a brand new one. Does that sound about right?
Blevins: I can't speak to that exactly but it sounds...
Blevins: Yeah, ballpark.
Martin: When you hear those numbers you begin to understand the economics of it.
Blevins: Yeah, and I'm thankful for all the investors and the movers and shakers that get out there and take the risk and often are not complimented or rewarded for their risk. We need more of them.Tom Martin's Q & A Morning Edition All Things Considered Tom Martin's Q & A Morning Edition All Things Considered