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VOL. 124 | NO. 7 | Monday, January 12, 2009

2008: Year to Forget in Real Estate

By Eric Smith

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FEWER SALES: Despite the “Sold” sign gracing this East Memphis home, 21 percent fewer residential properties traded hands in 2008 compared to 2007. Not only did sales decline, but a higher percentage of them were bank sales, or foreclosures. -- PHOTO BY ERIC SMITH

Of all the real estate storylines from 2008, perhaps the most revealing was that bank sales – i.e., foreclosures – accounted for 37.3 percent of the residential market share in 2008, up from 24.7 percent in 2007.

That’s just one example proving how last year was unlike any that Memphis real estate professionals have ever seen – or hope to see again.

“It’s just one of those phenomenal years that you hope won’t happen more than once in a lifetime,” said William Mitchell, managing broker at Crye-Leike Realtors Inc.’s Hickory Ridge office and past president of the Memphis Area Association of Realtors (MAAR).

The phenomenon occurred because of an ongoing subprime fallout and credit crunch exacerbated by widespread financial collapse, all of which combined to wreak havoc throughout 2008. And nowhere was the demise more evident than in the housing market.

Shelby County saw just 16,481 home sales last year, a 21 percent decline from 20,744 in 2007, according to year-end data compiled by real estate information company Chandler Reports, www.chandlerreports.com. Bank sales totaled 6,144 in 2008 and just 5,123 in 2007, a 20 percent increase.

Dropping dollars

But the slump wasn’t evident only in the number of homes sold. The average sales amount for homes – new and existing – in 2008 was $131,725, a 14 percent dropoff from $152,858 in 2007, although bank sales altered that figure dramatically.

Bank sales averaged $63,549, down 5.1 percent from $66,998 in 2007. And non-bank sales averaged $172,257, down 4.8 percent from $181,016 in 2007.

That slight decline for non-bank sales was a positive sign from 2008, but it still resulted in a smaller bottom line for the amount of money generated by the housing market.

Home sales totaled $2.17 billion in 2008, a 32 percent decline from $3.17 billion in 2007. Of the 2008 total, $1.78 billion came from non-bank sales and $390.5 million came from bank sales; in 2007 those figures were $2.83 billion and $343.2 million, respectively.

A few ZIP codes fared well in the average sales price category, registering declines in the single digits or even increasing in value. Downtown’s 38103, for example, posted a 1 percent increase in average sales price, from $241,366 in 2007 to $242,869 in 2008.

Greenlaw’s 38105 enjoyed a 52 percent increase ($47,724 to $72,689); Eads’ 38028 saw a 12 percent increase ($517,900 to $578,160); and River Oaks’ 38120 notched a 9 percent increase ($292,048 to $319,078).

Many of the steady, stable neighborhoods – Arlington/Lakeland, Collierville, Cordova South, Germantown, Midtown, Millington, Poplar-Perkins, among them – had only slight declines.

“There are areas of Memphis where the price has really not changed much,” said Glenn Moore, broker and owner of Glenn Moore Realty and president-elect of MAAR. “The areas that are getting hit the hardest in Memphis are the areas with heavy foreclosures. The rest of the city that’s not being affected by foreclosures really hasn’t been seeing the damage that you hear about going on across the nation.”

Strong areas

Foreclosures clearly took a toll on the area. The top ZIP code in terms of actual sales was Frayser’s 38127 with 1,009 home sales in 2008 totaling $29.4 million. But 575 of those were bank sales – tops in the county – a sign that Frayser remained a hotbed for loan defaults.

It was followed by the University of Memphis’ 38111 with 911 sales totaling $89.1 million and Collierville’s 38017 with 882 sales totaling $282.2 million.

Strictly looking at ZIP codes in terms of non-bank sales, Collierville was first with 803 sales totaling $259.8 million. Next were Arlington/Lakeland’s 38002 with 664 sales totaling $166.3 million and the University of Memphis’ 38111 with 637 sales totaling $80.6 million.

The top ZIP codes in terms of dollar amount – both bank and non-bank sales – were Collierville’s 38017 with $282.2 million (882 sales); Arlington/Lakeland’s 38002 with $188 million (787 sales); and Cordova North’s 38016 with $132.8 million (868 sales).

“There are a lot of sales going on,” Moore said. “It’s not like the country has shut down and Memphis has shut down. We haven’t shut down business. Business is going on as usual while everybody in the periphery is being scared. While people are being scared, other people are getting some good prices on houses.”

Another key figure from 2008 was the top sellers list. Most of the year, Deutsche Bank National Trust Co. led Shelby County based on its role as custodian for mortgage documents.

But the U.S. Department of Housing and Urban Development made a late surge to pull ahead for the year. HUD finished 2008 with 763 sales totaling $33.4 million. It was followed by Deutsche Bank National Trust with 727 sales totaling $45.5 million; U.S. Bank NA with 606 sales totaling $39.3 million; Fannie Mae with 365 sales totaling $23 million; and Wells Fargo Bank NA with 334 sales totaling $20.2 million.

Steering the way

Debbie Sowell, principal broker at Revid Realty in Midtown, saw good sales numbers for most of 2008 until the end of the year when the stock market crashed. She said first-time homebuyers, who weren’t heavily invested in the stock market or trying to buy a house, sustained her business.

That segment of the market – and the rise of real estate investors – will be two trends to watch in 2009. Underscoring everything, however, will be the overall economy and jobs. Sowell pointed out that job losses had a huge impact on housing in 2008, as people in fear of becoming unemployed chose not to buy.

“I truly believe that jobs and housing are going to be the driving force for the economy,” Sowell said.

Mitchell said he believes those driving forces will help turn the market around in 2009.

“You’ve got to be (optimistic),” Mitchell said. “We know that the housing market statistics will prove that we’re such a major part of the economic outlook of a society that if we are trying – and we are – to get out of the doldrums of the market we’ve just gone through, the housing market has to be addressed. When it is addressed, and the market begins to pick up, I believe the economy will pick up.”

Chandler Reports is a division of The Daily News Publishing Co.

PROPERTY SALES 42 266 3,343
MORTGAGES 12 152 2,252
BUILDING PERMITS 429 905 7,956
BANKRUPTCIES 41 130 1,872