Prices seem to have hit bottom; a recovery should follow
Those with ties to the local real estate market are welcoming some long-awaited news in the beginning weeks of 2012 home prices may have finally bottomed out.
In most regards, hitting bottom is undesirable, but for the area's real estate market, which largely is the driver of the local economy, it in all likelihood means the beginning of a recovery.
And a recovery cannot come soon enough, local Realtors say, as significant depreciation in value and demand over the past few years has meant slow to no growth for the area's real estate-based economy.
While that has been the scenario for the past few years, Chuck Mangold Sr., managing partner of Benson and Mangold Real Estate in Easton, said he believes prices have finally bottomed out, and purchases are beginning to pick up as a result.
"Over the past six weeks, it's been the busiest I've seen it in the nearly 30 years I've been in the business," he said. "It's inordinately busy given the time of year."
Prices are back to 2001 levels, after dropping between 40 and 50 percent from peak levels in 2006, said Mangold, who called it "the best time ever" to buy real estate in Talbot County.
Echoing that sentiment was Hugh Smith, broker of Coldwell Banker in Easton, who said there are some "phenomenal" values to be had right now.
Although inventory is still high, Smith said it seems to be shrinking, and only will shrink more as demand increases.
"We've had a number of good sales in the first few weeks of January," he said. "But I think people will wait for the elections to really express their enthusiasm."
While optimistic that a recovery will begin in 2012, Smith said it may not be all uphill, as a number of foreclosed properties now owned by the banks and a number of short sales have yet to come to the market.
Those properties will most likely drive real estate market trend lines for 2012, he said, but aren't expected to prompt any more radical changes.
Even with a recovery, though, Smith said he doesn't believe the local market will return to where it was during the boom years.
"We have a good shot at stabilization this year, but as we start to recover, we will recover equal to the rate of the consumer price index 2 to 2.5 percent a year," he said. "It's a mistake to think we'll go back to the double-digit appreciation rates. It's going to take a while for this ship to right itself."
Still, Mangold said, a recovery is a recovery, and even a small one will have a ripple effect throughout the local economy.
"I think it's going to translate fairly quickly into a boost for the economy," he said. "These buyers are going to be doing some remodeling and put on some additions all of the stuff that's been missing for the past five years."
They key factor that's changed, Mangold said, is sellers finally have gotten realistic about pricing.
"That's the difference here," he said. "Before, sellers were waiting for a lightning strike, and lightning strikes don't happen any more. If something is priced right, it will sell."
In addition to sellers holding out for a higher price, tightened lending has been another hindrance to a quicker recovery, Smith said.
"There are low mortgage rates out there, but only for the most credit-worthy customers," he said. "Mortgages have been at historic lows for a long time now, and we're not seeing any effects from it."
Another reason the local market hasn't been able to recover as quickly, Smith said, is because the region is still suffering as a whole.
"We work with a lot of people who would like to buy property here, but can't do so until they sell their house on the western shore or somewhere else," he said. "It's sort of a big daisy chain. If people can't sell their property, they can't come up with the equity to move here."
Of course, consumer confidence also has played a big part in delaying a recovery that Smith himself thought would begin last year.
"We saw a surge in our business in February 2011 we saw the market starting to gain some traction and confidence starting to return," he said. "Then we turned on our television sets and saw rioters in Tunisia and Egypt the beginning of the Arab Spring then the earthquake in Japan, which resulted in the meltdown of the nuclear reactor. We saw all the confidence just evaporate because of the huge volatility in the national equities markets, the huge number of foreclosures on the Eastern Shore. For the balance of the year, we didn't feel there was much confidence around at all."
With a new year, however, comes new hope hope that all the hindrances will subside and a recovery will emerge.