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Gloria E. Salavarria
The Truth Correspondent
February 23, 2008
Job concerns prevent strong buyers' market
ELKHART -- Some say nothing exciting happens here in Elkhart County when compared with life on the East or West coasts. And when it comes to real estate, that's a good thing.
While the bubble in the housing markets on the coasts has burst, real estate here has maintained its value.
"We never saw the hyper-appreciation in property values that other states saw," said Gary Cripe of Appraisal Solutions of Goshen. "When properties in California, Arizona and Florida were appreciating in the double-digit range, we were still in the single digits. And because of this I have not noticed any significant drop in real estate values. Houses may sit for a longer time on the market but I don't notice any downward pressure in value. Right now, we're right around 1 percent appreciation.
Overall, new home construction is down but homes are still being built in the $100,000 to $150,000 range and the $400,000-and-up market, as well as in special niche markets such as the upscale condos being built for empty nesters in Middlebury. Here, Mikhail Bekhterev of Goshen prepares to install shelves in a closet at a condo unit being built at the Villas of River Park.
"The biggest concern comes from the employment sector. People are very cautious to go out and either remodel or sell and move up from their current home because of the job situation locally."
It's the concern about jobs that keeps this area from being a strong buyers' market. But there are still two strong areas: the range of first-time home buyers ($100,000 to $150,000) and the range of upscale buyers ($400,000 and up), according to local Realtors.
"There is more movement at this time in the low and the high price range," said Karen Smith of Century 21 Landmark in Goshen. "The midrange -- the $190,000 homes -- are not moving as fast.
"Still, the National Association of Realtors is predicting a late spring to late summer return to more of a normal market."
Banker Andy Harlow of First Federal Savings Bank of Elkhart said, "We believe (the real estate and mortgage lending) business in 2008 is going to be OK. There is a good inventory of homes to choose from at fair prices and at very good interest rates. Money still is available for 100 percent financing but it's tightened up a bit.
Harlow added that "rates are lower today than they were six months ago and we believe they will be lower going into the summer period which, of course, is always our busiest time. The mortgage and real estate business picks up when people start to think of moving during the summer months."
He said the subprime lending crisis isn't likely to affect his bank as much because it really didn't participate in it to begin with. But, agreed Harlow, "the subprime mess is not going away anytime soon. It's going to be a force to be reckoned with as the economy struggles its way out of it."
Harlow concurs with the Realtors' assessment of the market in general. "We didn't have the out-of-control appreciation levels that the East and West Coast had for the last five years. There was no bubble here to break and so we haven't lost much of anything. Instead, we chunked along at the nice steady 3 percent per year."
That said, there has been a slowdown in home construction. Building permits issued in Elkhart County have been on a gradual downward trend from an abnormal high of 866 permits in 2004 to 505 permits for last year, according to Gretchen Helman of the Builders Association of Elkhart County. Still, that doesn't signal a recession from the builders' perspective as much as a market correction -- one that was not unexpected, said Helman.
"Things don't always rise and certainly the subprime debacle has had a negative effect on the marketplace," said Helman. "Also, the high gas prices are forcing families to think more and decide what they can afford on their budget."
And even though Hurricane Katrina occurred in 2005, it's still having an effect on the costs of building materials, which have gone up because of the ongoing reconstruction in the wake of that storm, Helman noted.
"The subprime debacle has forced banks to be more stringent in the loans they make to builders who are building spec homes," she said. "There are fewer spec homes being built. Elkhart County has been fortunate all along in being a strong market for home construction, although at this time construction is geared more toward the higher end."
The tightening of available new home construction should make it easier for existing home sales.
"New construction is still a stiff competitor to existing homes," said Kent Miller of Century 21 Landmark of Middlebury. "Most buyers will choose new construction over existing so long as the homes are fairly comparable.
"I think that the market will be OK -- not the best on record, but not the worst either. I've been a Realtor now for 30 years and have seen the market far worse than it is now, such as in the early '80s when mortgages went up to around 16 percent. Now that was a tough market."
Gloria E. Salavarria
The Truth Correspondent
February 23, 2008
