VOL. 123 | NO. 9 | Monday, January 14, 2008
Residential Sales Drop In '07
By Eric Smith
HIGH PRICED: The 38103 ZIP code of Downtown fared better than other submarkets during 2007, leading the county in average price per square foot at $157.30 a foot. -- Photo By Eric Smith
A new year gives everyone the chance to forget past failures and begin anew. When Jan. 1 rolls around, people vow to lose weight or stop smoking, change their jobs or change their lives.
In that same vein, the housing industry has resolved to put 2007 in the rearview mirror. Unfortunately - as with many New Year's resolutions - it won't be easy.
Residential sales declined 18.1 percent in Shelby County from 2006 to 2007, falling in every ZIP code except one, according to data from real estate information company Chandler Reports, www.chandlerreports.com.
There were 20,773 residential sales during 2007, down from the torrid sales pace of 2006, which saw a record total of 25,284. (Residential sales include condominiums, duplexes and existing and new homes.)
After the dismal year in which the housing market took massive public relations hits in addition to home sales tanking, local home builders and Realtors plan to start a new chapter by fighting consumer doubts and working through the problems that plagued their businesses all year.
It could be an uphill battle against worries stemming from subprime lending, skyrocketing foreclosures and the nationwide credit crunch.
"It was definitely a year that we saw a change," said Elsie Ward, broker for Crye-Leike Inc. and vice president of the Memphis Area Association of Realtors. "We had been going, going, going; things had been going up almost monthly sometimes. When the subprime lending crisis occurred, it made last year unusual. I think this year we're getting over that crisis. We're trying to put that behind us."
Down and confused
To succeed, the industry also needs to assure homebuyers that things aren't as bad in Memphis and Shelby County as they are in other markets, and also that 2007 achieved the fourth-best sales in history, falling just shy of 2004 for third-best status.
The industry might need to aggressively fight the notion - whether real or perceived - that the housing market is in complete disarray.
"With all the things that are going on in the real estate industry on a national basis, we're still being inundated by a lot of negative stories," said Neil Hubbard, principal broker at Prudential Collins-Maury Inc. and immediate-past president of MAAR. "Our real estate market is much more stable than a lot of these other ones across the country."
But that can be a tough sell when considering that on both U.S. coasts housing values plummeted and homeowners panicked amid a housing meltdown. News stories about the proverbial housing bubble beginning to burst often conflicted with the local scene.
"When people get mixed signals, mixed messages, it's easier to make no decision than it is to make a decision," said Doug Collins, president of the Memphis Area Home Builders Association as well as owner of both the real estate company Prudential Collins-Maury Inc. and building company Sovereign Homes LLC. "If there wasn't a have-to reason to sell, it was easier to sit on the fence and not make a decision. The national media has people confused."
Who declined the least?
What isn't confusing is how nearly every part of Shelby County suffered during the 2007 slowdown. Only the 38105 ZIP of Greenlawn near Downtown registered positive year-over-year growth, moving from 62 homes sold in 2006 to 64 homes sold in 2007, for a 3.2 percent increase.
The next best ZIP was Hickory Hill North's 38115, which saw a 4.6 percent decrease, from 608 sales to 580; and then Eads' 38028, which saw a 5.8 percent decrease, from 69 sales to 65.
Elsewhere in the county, most submarkets declined at double-digit rates, even some of the perennially strong suburbs such as the Arlington/Lakeland ZIP of 38002 (22.1 percent decline); the Collierville ZIP of 38017 (15.4 percent decline); and the Germantown ZIP of 38138 (21.6 percent decline).
And while home values didn't fall into a tailspin as they did elsewhere, the average sales price did drop from $156,801 in 2006 to $152,815 in 2007; the average home size fell from 1,909 square feet in 2006 to 1,895 in 2007; meaning the average price per square foot dropped from $74.52 a foot to $70.82.
A decline, yes, but not the rock-bottom devaluation seen elsewhere.
"Some markets have a lot more inventory than we do, and they've also seen some fairly significant price declines, where luckily for the Memphis area we didn't really see that," Hubbard said.
Leading the way
Though Collierville's 38017 ZIP suffered a sales dip, the suburb ranked first in the county for total sales with 1,204 homes sold and total sales dollars with $394.2 million.
It was followed in total sales by the 38127 ZIP of Frayser with 1,149; the 38111 ZIP in the University of Memphis area with 1,147; and the 38002 ZIP of Arlington/Lakeland with 1,145 sales.
As for total sales dollars, Collierville was followed by the 38002 ZIP of Arlington/Lakeland ($298.5 million for 1,145 sales); the 38139 ZIP of Germantown ($200.4 million for 411 sales); the 38117 ZIP of Poplar/Perkins ($193.1 million for 913 sales) and the 38016 ZIP of Cordova ($189.3 million for 1,089 sales).
The 38028 ZIP of Eads led the county in average sales price at $514,896 per home, while the 38103 ZIP of Downtown led the county in average price per square foot at $157.30 a foot.
Hopes for the future
So, what lies ahead for 2008? Can the mortgage industry continue its pledge - at the request of the federal government - to freeze interest rates on a portion of adjustable-rate mortgages scheduled to reset this year?
"The foreclosure piece will still be working through for some time," Hubbard said. "There are still a lot of those adjustable-rate loans out there that are going to adjust, and some of those people might have problems."
Moreover, can rates stay low? And can Realtors convince the public that it's a buyers' market?
"We need to help them navigate all the hype that's out there about the bad market, about the mortgage industry," Ward said. "That's our role. We're going to become the guide for them to go through this maze of information that's out there."
In other words, can the housing industry meet its New Year's resolutions?
"How the market will respond in '08 is anybody's guess," Collins said. "The traffic that my homebuilder members have seen since the first of the year has increased. Whether that's going to equate to sales, whether the people going through model homes are in a position to buy, or whether they have houses to sell, we probably won't know the answer to that question for another few months."