Though Lancaster County home sales continued to slide in the first quarter, one part of the market is doing relatively well, giving the industry some much-needed hope.
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The under-$200,000 price range is at least holding its own, and the real estate community anticipates that will create a "trickle-up" effect as increasing numbers of entry-level buyers purchase houses. The $8,000 federal tax credit for first-time homeowners, who make up much of the sub-$200,000 market, is considered key, especially if the program is changed to allow the money to go toward a down payment.
And lenders, who had been doing more refinancings because of historically low interest rates, now say mortgage activity is clearly on the rise.
According to the Lancaster County Association of Realtors, 712 homes sold in the first three months of 2009, a 24.3 percent drop from the 941 settlements in January, February and March of 2008.
However, the 18.3 percent decrease from March 2008 to 2009 was smaller than the declines reported in the first two months of the quarter.
Of the 712 houses sold, 71.7 percent went for less than $200,000, compared to 66.8 percent during the same period in '08.
The upper end of the market is clearly struggling, however, as the number of homes selling for $200,000 or more in the first quarter dropped from 312 last year to 208 this year.
The fact that fewer higher-priced homes are moving helps explain why the average sale price in the first quarter slipped from $182,150 in 2008 to $170,940 in 2009, a 6.2 percent decline. Ten years ago, the average first-quarter price was $122,419.
Meanwhile, the median price fell from $169,000 to $162,000. (Half the properties during this period sold above that number, and half sold below.)
Scott Ulrich, president of LCAR, said the sub-$200,000 market "appears to be doing pretty well.
"Maybe that's being pushed by the $8,000 [tax] credit."
The stimulus bill signed by President Obama in February included that credit for first-time purchasers as a way to jumpstart the housing market.
And now there's a move to make that available earlier in the home-buying process.
The U.S. Department of Housing and Urban Development is working on a plan that will allow Federal Housing Authority-approved lenders to provide buyers with the tax credit cash up front.
"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment," said Shaun Donovan, HUD secretary, in a recent speech before the National Association of Realtors.
It's unclear whether authorization for the loans will be available across the board or only in states where the state housing finance agency already has a tax credit bridge-loan program in place.
Currently, 10 states have such a loan program, including Pennsylvania.
"If you're a first-time home buyer, it's a wonderful time to buy" because of such incentives, Ulrich said.
A National Association of Realtors survey showed first-time buyers accounted for 53 percent of transactions in March.
But those who want to take advantage of the $8,000 credit need to move fast, Ulrich said, because it's set to expire Nov. 30.
"You've got to settle by then," he said, which means the house should be under agreement no later than August or September.
The sub-$200,000 price range is "fast-moving," said Serena Reidel, an agent with Long & Foster Real Estate.
"The last two months, it's really picked up," said Reidel, who works with a lot of entry-level buyers.
Homes are staying on the market longer, with 33 percent in the first quarter taking more than 120 days to sell, compared to 24 percent during that time last year, according to LCAR.
But in the first three months of 2009, 27.5 percent of houses sold in less than 30 days, so some inventory is still moving rapidly.
Wendy Hughes said she thought that it might take a while to find a buyer for her mother-in-law's 1950s ranch house in East Hempfield Township because so many other residences in that neighborhood were on the market.
But an agreement was reached in less than two weeks, and settlement is scheduled for next month. The sale price is between $100,000 and $200,000.
"I had no clue we'd be able to sell it so quickly," Hughes said.
Her agent, Diana Monger of Keller Williams Homes & Land Realty, said, "The phone started ringing off the hook" as soon as the house was listed. In the brief period before it went under agreement, Monger said she showed the property 14 times and received multiple offers.
Brian and Judy Willison also found a buyer for their East Hempfield Township rancher, listed at less than $200,000, within a month. The purchaser is a first-time homeowner, Brian Willison said, and settlement is planned for July.
There's also evidence on the mortgage side that the market might be picking up.
Ken Pederson, branch manager of Fairway Independent Mortgage Group, said he's seeing a major uptick in the number of mortgage preapprovals, which means more people are house shopping. Mortgage applications and agreements are rising, too, he said.
Early this year, Fairway was mostly busy with refinancing activity, Pederson said. Mortgage rates continue to remain historically low, at around 47-i percent for a 30-year, fixed-rate loan with zero points, he said.
But now the ratio of refinancings and new mortgages is 1-to-1, Pederson said, with purchases about to surpass refinancings.
He said the turnaround started around the end of February and the beginning of March, and he expects it to continue.
"I think by the end of the year we're going to finish very strong on the purchase side."
Paula Wolf is a staff writer for the Sunday News. She can be reached by e-mail at pwolf@lnpnews.com.
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