By HOWARD FRANK January 08, 2012
The Pocono housing sales slump may have bottomed out, but don’t start celebrating yet.
Prices could continue to fall for the foreseeable future.
There’s apparently one group that thinks now is a good time to buy.
Price erosion may be the result of investors beginning to hop into the market, according to Tom Wilkins, CEO of Better Homes & Gardens Wilkins & Associates Real Estate in Stroudsburg.
“They are the ones who come into the market to do the flips,” he said. “The investors have to do one of two things — flip it or rent it.”
Rentals are a hot commodity right now, according to Wilkins, which he said was up by about 1,000 percent last year.
The rental market is in part shaped by the aftermath of the foreclosure boom of the late 2000s.
“There is an interesting renter out there. He or she is the one who walked away from their home and still have their job and can pay the average rental of $1,000 to $1,100 without paying the real estate taxes,” Wilkins said.
Some professionals point to a glut of homes for sale along with a new dynamic — investors and renters combining to depress prices.
In 2011, Monroe County home sales grew by 2 percent over the previous year, while the average sales price dropped by 7 percent.
The average sales price fell from $163,232 in 2010 to $152,370 last year, according to Pocono Mountains Association of Realtors data.
Pike County showed a 2 percent drop in sales in 2011, while home prices fell by a sharp 10 percent.
Pike homes averaged $152,370 in 2011 versus $169,686 in 2010, according to the Pike/Wayne Association of Realtors data.
So is the worst over?
“No, it hasn’t bottomed out,” said Eileen Chaladoff, president of Pocono Mountains Association of Realtors and an agent with Prudential Associates in East Stroudsburg.
“There’s about three to four months of inventory out there. We have to get rid of the short sales and foreclosures. That affects the regular sales. We may have had more units sold, but the fact the prices dropped were because of the short sales and foreclosures.”
A short sale is a home sale where the lender agrees to accept less than what’s owed on the home to avoid a foreclosure.
Steve Horn of Steve Horn Real Estate in Stroudsburg agrees with Chaladoff.
“There are still a lot of foreclosures and short sales,” he said. “Short sales have a big impact on the market because the buyer can typically accomplish a pretty favorable sales price on a short sale. And even more so on a foreclosure.”
Horn sees sales prices continuing to fall in the new year.
And though prices are falling, taxes aren’t. In some cases, the monthly tax escrow on a home could exceed the mortgage payments.
“The colonial that used to sell for $250,000 is down a good 30 to 40 percent,” Horn said. “Now you can buy that house for $160,000. Here’s the problem: The taxes on that colonial might be $8,400 a year. That’s $700 a month. The principal and interest on that property might be less than their tax escrow.”
Chaladoff sees this year being a continuation of last year.
“If the banks move a little faster in regards to short sales, we could move the inventory a lot faster,” she said.
Economists are forecasting that U.S. home prices will bottom out in 2012, and previously reluctant buyers will return to the market, according to NuWire Investor, a service targeted toward alternative investors.
But the service warns that a large “shadow inventory” of soon-to-be foreclosed homes still exists and that these will continue to hamper a wider market recovery.
And many foreclosures remain on the books of lending institutions, making it harder to predict how the market will respond when they begin to clear.
NuWire also said that although mortgage rates remained amazingly low for 2011, under 4 percent for a 30-year fixed mortgage, it won’t stop a coming wave of foreclosures in 2012.
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