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VOL. 123 | NO. 48 | Monday, March 10, 2008

Housing Dark Cloud Still Looms

Condo market provides sliver of hope

By Eric Smith

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ON THE MOVE: Downtown Condo Connection is moving into a larger office space at the 420 South Front Condos development. The company's growth comes at a time when housing sales are slumping. Yet condo sales registered a decent month in February, increasing 11.3 percent from February 2007. -- Photo By Eric Smith

It's not easy to find a silver lining in the dark cloud that hovered over February's residential housing numbers. With home sales in Shelby County dropping 15.6 percent from the same month last year, the real estate slump that began in 2007 appears to be in full force.

Just 1,222 homes sold in February 2008, compared to 1,447 in February 2007; the month's total also was down 17.3 percent from the 1,477 homes sold in January, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

But take a deeper look at the stats and one bright spot emerges. Condominium sales took a respite from the dreary months they've experienced of late, especially in the Downtown ZIP code of 38103, where the threat of a busted bubble has seemed imminent.

Hope starts Downtown

Downtown led the county with 19 condo sales during the short month, up 26.7 percent from the 15 sold in February 2007 and up 35.7 percent from the 14 sold in January.

Overall, 69 condos were sold in Shelby County, up 11.3 percent from the 62 that sold in February 2007. Equally important, the value of condos has risen significantly. The average sales price of condos last month was $163,583, up 7.4 percent from the average sales price of $151,457 in February 2007.

The average square footage and price per square foot experienced only negligible changes, less than 2 percent for each category. But the total sales volume for condos in the county during February was $11.3 million, up nearly $2 million from the $9.4 million in February 2007.

Those numbers aren't earth-shattering, but they represent a potentially good omen for the submarket, which saw only 258 condo sales in all of 2007 compared to 469 in 2006.

"We've had quite a few people coming in the office lately," said Sue Tines, managing broker at Downtown Condo Connection. "It kind of gives you a good feeling."

Can the good feelings last? Tines, a 33-year industry veteran, is quick to point out how the drop in condo sales that took place last year was the simple law of diminishing returns that's sure to be reversed.

"I've seen it up and I've seen it down. I've seen it go through these cycles," she said. "Way back when people had 17.5 percent interest, they were still buying."

Optimism despite numbers

Not everyone is buying, however. As a whole, residential sales in Shelby County suffered a drastic decline in February, according to the latest Chandler Reports data.

The largest dip came in the 38002 ZIP code of Arlington/Lakeland, which experienced a 52.9 percent dropoff from February 2007 (88 homes sold) to February 2008 (42 homes sold).

The average sales price for homes countywide also declined. It was down 20.3 percent, from $149,912 in February 2007 to $124,664 in February 2008. During the same period, the average size fell from 1,872 square feet to 1,806 square feet, while the average price per square foot fell from $78.23 per foot to $66.50 per foot.

So, the housing slump rolls on, right? Perhaps. The foreclosure fiasco still is wreaking havoc on the industry, as subprime loans continue to reset and consumer confidence continues to wane. But real estate professionals are seeing signs of life in certain submarkets, and even from their clientele.

For example, the Midtown ZIP of 38104 enjoyed a 68.4 percent increase from February 2007 (19 sales) to February 2008 (32 sales), marking the highest change countywide.

Joe Spake, broker for Crye-Leike Inc. as well as a director with the Memphis Area Association of Realtors, last week received an e-mail from a prospective buyer who thinks the market has reached rock bottom and soon will turn upward. Now he's ready to buy.

"I'd like to see more people like that," Spake said. "It's my perception that we're coming out of it, that we've got a whole lot more buyers who are showing interest now. People that have kind of been sitting there are starting to look again. I'm feeling real optimistic."

Moving up

The owners of Downtown Condo Connection are feeling so optimistic they're moving to a larger office with plans to expand their staff. This week the company will relocate one building over, from 408 S. Front St. to 420 S. Front St., which is triple the size of their current digs.

The building also has 36 condominium units - the aptly named 420 South Front Condo development - of which Downtown Condo Connection has sold 23.

Tines said the plan is to soon bring on more sales professionals, which defies the current trend of downsizing in response to the market.

"We're talking about adding more people," Tines said. "We're going to have to do that. My outlook for Downtown is very positive."

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PROPERTY SALES 83 188 9,757
MORTGAGES 100 182 11,496
BUILDING PERMITS 194 328 20,638
BANKRUPTCIES 61 119 6,556

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