The attractiveness of Asheville and the rest of Western North Carolina has helped shield the area from the worst effects of a severely depressed housing market nationally and the fallout from a continuing subprime mortgage crisis—one that has led to record foreclosures and a tightening of credit standards and available financing options.
But even Asheville is not immune to the problems plaguing other parts of the nation, where economics, demographics and irrational exuberance in the housing market has led to collapse in states such as Florida and California. While the local housing bubble hasn’t burst, it’s definitely showing signs of strain, according to sources from across the local real-estate spectrum.
Take, for example, seller Jim Roberts, a name familiar to Biz readers, who finally sold his house on Nov. 1. The former executive director of the Blue Ridge Entrepreneurial Council says his house had been on the Asheville market for a full year and that he and his wife were forced to reduce their asking price by nearly 20 percent before it finally sold to a Raleigh couple.
The days of houses in the Asheville metro area selling within weeks or even days of listing appear over for the time being. The average number of days that a house in the metro area stays on the market has been slipping since the national housing downturn began in earnest last year. According to the latest home-sale statistics compiled by the Asheville Board of Realtors, houses that were sold in September had been on the market an average of 102 days, compared to 87 days in September 2006.
And the number of homes sold in September dropped to 537 compared to 782 in September 2006, according to the board’s statistics.
A lot of the problem locally is spurred by market unrest elsewhere. The old adage in real estate of “location, location, location” has taken on new meaning for area builders and home sellers: People located in places such as Florida—a state that accounts for most of Asheville’s in-migration and one of the states hit hardest by the real-estate meltdown—simply aren’t able to buy houses at the levels Asheville previously enjoyed, says Kent Wolff, regional manager for Mountain Lifestyles Mortgage in Asheville.
“When the people in Florida and the retirees can’t sell their house wherever they are, they can’t come and buy our house,” agrees Roberts. “And with the problems in the mortgage industry, it would be even harder to carry two mortgages.”
According to Susan Edwards, who, along with her husband, Derrick, makes a living from buying, renovating and reselling homes, the market is indeed down. Local Realtors have told her that their sales volumes are down 20 percent, though their commissions haven’t dropped, thanks to the continuing rise in home values and strength in the high-end market, especially million-dollar homes that have become the area’s hottest housing commodity. While builders currently have a backlog of such homes on the market, that’s where the action is and will continue to be for the foreseeable future, according to Edwards and other real estate sources. Meanwhile, the market for mid-level homes is “flooded” with inventory. Edwards says she feels fortunate that her latest project is a house priced close to $700,000, which likely will be snatched up relatively quickly.
“Everybody’s feeling it, but I’m just glad beyond relief I don’t have a house that’s $250,000 or $300,000 sitting on the market, because it would sit there for six months or more,” Edwards says.
Just 14 months ago, she adds, such homes would have gone quickly. Though there are several reasons that could be attributable to the local market downturn, Edwards pins most most of the blame on a glut of houses. A recent check of the Multiple Listing Service for homes in Montford showed 80-plus unsold houses in what is one of the area’s hottest locations, she says. And, she adds, “if you drive around West Asheville you won’t believe how many houses are on the market.”
Despite the downturn, Edwards is still bullish on the future of the local market, believing it will turn around. In the meantime, things might get worse before they get better, if the intelligence she is receiving from local market insiders is true. Don’t be surprised, she says, to see an uptick in foreclosures and antsy sellers reducing prices drastically.
One Realtor, who asked not to be identified, says she believes the local market is “crashing” and being supplanted by “million-dollar homes for rich people who are moving here and don’t fit in.”
“If you look at the facts, it’s pretty clear,” the Realtor said. “People, other Realtors, will give you positive [feedback on the strength of the market], but in reality there is about 30 percent more houses on the market [than last year] and they’re just not selling.”
While the area is seeing a glut of homes for sale, there is trouble on the lending side as well. Subprime loans, a mortgage class that has become a leading cause of the nation’s housing downturn, made up 21.1 percent of home mortgages in the Asheville metro area last year, according to statistics the Wall Street Journal assembled recently from federal data. That figure is up from 16.1 percent in 2004, the newspaper reported Oct. 11.
Asheville area subprime figures still trail state and national averages, however, with subprime loans accounting for 24.4 of the state volume. Nationwide, subprime mortgages made up 29 percent of the total last year, the Journal reported, though some economists such as the bearish Nouriel Roubini argue that subprime loans actually make up about half of all purchase loans nationwide. Roubini, a New York University economics professor and chief of Roubini Global Economics, says the subprime category should also include such near-prime mortgage classes as Alt-A loans, which are typically excluded from such analyses.
As a result of the subprime mess, there have been record foreclosures here and nationwide, and lenders have tightened their lending criteria—to the point that even many creditworthy borrowers are having a tough time qualifying for purchase loans, says Wolff. The lenders who created the mess are now overreacting in the opposite direction, meaning many worthy buyers will be forced to put off real-estate purchases for awhile, he says.
But Wolff, who acknowledges trouble locally, believes the problem is not severe. “I don’t see many fire sales; I don’t see a rush to sell a home for below market value. … I concede it’s turned slightly to a buyer’s market, but there’s great values, and at this point I’m not overly concerned.”
Neither is Betsy Reiser, broker-in-charge with Appalachian Realty in Asheville. The rich will keep coming to buy homes, she says. As for those who aren’t wealthy, housing has long been an issue here, but she believes that local governments and nonprofits are gathering steam on efforts to expand housing opportunities, and that builders are starting to realize the market potential for more affordable housing in the area.
“You could ask any Realtor and they all have a different opinion, but I guess I must be taking the long view of the whole thing, having been doing this since 1979,” says Reiser. “It just really seems to me we are in a really good situation here in our area because people still want to move here. … Even though some people think that they should stop moving here, they’re not gonna.”