Hope rises for Central Indiana home sales in 2009
As mortgage rates drop to near 5%, optimism peeks out of the gloom
By Jeff Swiatek and Tom Spalding, The Indianapolis Star
23 December 2008
Despite another down month of home sales in Central Indiana, area Realtors and mortgage companies see more than a glimmer of hope for their business in early 2009, thanks to mortgage rates falling to levels unseen since the 1960s.
The federal government's efforts to aid the mortgage market have driven rates to near-50-year lows, cutting the cost of buying a home mortgage and giving homeowners with good credit an opportunity to refinance their mortgages.
"We're certainly seeing a lot heavier volume and a lot of new applicants (for refinancing and home buying) than we've had," said Michael Strawn, a vice president at First Mortgage in Indianapolis.
But newly issued statistics show home sales in Central Indiana dropped 29 percent during November compared with the same month last year. The Metropolitan Indianapolis Board of Realtors said it tracked 1,448 homes sold in the month, down from 2,028 in November 2007.
Mortgage-finance giant Freddie Mac reports the rate on an average 30-year fixed mortgage slid to 5.19 percent last week, the lowest since the federal mortgage guaranty company survey began in 1971. The 30-year rate was 5.47 percent last week and 6.14 percent a year ago. The Web site bankrate.com listed the national average at 5.29 percent Monday.
The drop was helped by the Federal Reserve's decision last week to cut a key interest rate to a record low and its pledge to give the ailing mortgage market more help if necessary.
The average sales price in the 13-county study fell from $143,182 to $128,867, a 10 percent drop, from November 2007 to November 2008. The median sales price dropped 13 percent, from $115,775 to $100,800. All metro-area counties saw sales declines in November, paced by a 44 percent drop-off in Johnson County.
In the past 12 months, sales are down 16 percent in Central Indiana.
Strawn said potential homebuyers are slow to act in today's uncertain market.
"Whether it's first-time homebuyers or people who want to move to a nicer home, people are waiting, even with interest rates being what they are, even with home values lower and plenty of inventory to choose from. They are just wanting to take a wait-and-see attitude. It's a true buyers' market, but most people don't seem to feel like they are in any hurry."
G.B. Landrigan said he's seeing more folks interested in open houses, a sign that things might improve in January.
"Definitely there's better deals, better prices and low interest rates," said the owner of Landrigan & Co. realty. "I'm pretty encouraged."
The low rates stand to help tens of millions of homeowners cut monthly payments, which could result in more spending on goods and services and lift the economy, said Marc Savitt, president of the National Association of Mortgage Brokers.
The big questions are whether rates will go even lower and how long they'll stay down.
Leeland Thomas, with Abernathy Realty, described the current sales climate as "rough."
"I've been doing this since 1977," he said, "and this is probably the worst I've seen it."
He said there are some potential clients eager to refinance, but only if they can afford the hefty costs of doing so. He said most of the customers he's seeing are interested in taking advantage of a low down payment plan offered for buyers of homes owned by the U.S. Department of Housing and Urban Development and a program for rehabbers of fixer-upper homes offered by the Federal Housing Administration.
Even the historic drop in mortgage rates has done little to boost sales that are always meager in December, when the weather turns cold and people prefer to spend time on Christmas shopping. But it should boost spring sales that traditionally start in February after the Super Bowl, said Jerry Sider, managing broker at Carpenter Realtors' Meridian office on the Northside.
"When rates go down, people can afford more house," he said. "I think the combination of low rates, optimism over a new president and the offer by government of a $7,500 (credit) for first-time buyers . . . this should have a huge impact on real estate."
He said one buyer he's representing calculated that the drop in interest rates over the past month will save $200 a month in mortgage payments on a $300,000 mortgage.