Home sales in Central Kentucky fell for the second straight month in August as buyers retreated from the market without the incentive of the federal home buyer tax credit.
The credit, which ended in June, had propped up sales earlier this year, despite the economic malaise.
The Lexington-Bluegrass Association of Realtors concluded that many would-be August buyers bought before June, leading to a drop in residential sales of more than 25 percent in 14 Central Kentucky counties compared to August 2009.
"The critical element in all of this is consumer confidence, and it is completely wiped out," said Tim Haymaker, owner of Lexington's Haymaker Development Co.
Sign Up and Save
Get six months of free digital access to the Lexington Herald-Leader
The August statistics told that story. Compared to a year earlier, residential and town home sales dropped 26 percent; the average number of days it took to sell a home skyrocketed 51 percent; and the inventory of available homes jumped 10 percent.
In all, there were 13 homes available for each buyer in the market during August, according to LBAR's statistics.
Those statistics mark a sharp reversal from trends earlier this year when buyers flooded the market to receive an $8,000 tax credit for new home buyers and $6,500 for repeat buyers.
In May, residential home sales rose 36 percent compared with a year earlier.
LBAR president Anthony de Movellan warned at the time that the end of the tax credit would mean "drastically fewer buyers."
"As the market slows, pricing homes to sell is going to play an integral part in selling properties more expediently," he said.
De Movellan noted in Thursday's statistical report that low interest rates are helping drive purchases.
"It will be difficult to keep the interest rates at such historic lows, but the federal government has taken steps to maintain them," he said.
Haymaker said that despite the drop in sales, people are looking for homes.
"We're getting a lot more lookers at everything we do — home, lots, commercial — but they have an attitude that they're going to steal the house or whatever they're looking at," he said. "Frankly, there's just a lot of media play in this that you're going to get a great buy, and people are expecting that."
Michael Prather, a Realtor with Keller Williams Bluegrass Realty, said he expects the rising inventory of homes in and around Lexington is an issue that will solve itself.
"What will happen is the people who have to sell will get their price competitive, and the ones who don't have to sell will get their house off the market," he said. "Either way, it will thin out inventory."
Prather said the Lexington market remains much healthier than many others nationally because home values did not rise dramatically only to come crashing down like they in did in states such as Nevada, Florida and California.
Nationally, home sales plummeted this summer, and economists don't expect that to change until the unemployment rate falls significantly and credit becomes more accessible to potential buyers. National data for new and existing home sales in August is due out next week.
Applications for new home loans fell by nearly 9 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday.
Haymaker predicts it will be a slow climb out for residential real estate around Lexington, especially given that the home buying season has ended for the year.
Among the factors compounding the problem, he said, are many businesses are not transferring as many employees as they have in the past, and "just in general, there's a bad mood that things aren't getting better," he said.
He suggested that many buyers have a "pretty significant wait-and-see attitude toward the election. It could really turn things around if people feel the right combination of people make their way up to Washington."
If that's the case, things might start to change by late spring or early summer of next year, Haymaker predicted.
"It's not going to be a rapid ascent," he cautioned. "It's going to be a steady climb because there's just a huge amount of inventory."