Is local real estate market ready for comeback?

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MATT OLBERDING/Lincoln Journal Star

 Has the Lincoln real estate market found a bottom?

Though nobody’s got a crystal ball, several local Realtors say signs are encouraging that sales are starting to pick up and prices are stabilizing.

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Dick Roberts, a broker at Lincoln First Realty, says he thinks there is a lot of pent-up demand among buyers waiting for the right moment to enter the market.

“We’re getting showings on our listings and getting traffic at open houses,” Roberts said.

He said he is seeing a lot of interest among first-time buyers, and once those people start buying, it allows the people they are buying from to move up to a bigger house.

Rich Rodenburg, co-owner of Nebraska Home Sales, said he sees a similar situation.

“There’s a lot of dominoes stacked up to where if one house sells it might mean three or four also sell,” Rodenburg said.

Don’t just take their word for it: Data from several local and national sources back up the contention that the local market, which never really fell too far, may be on its way back up.

But there are still some signs of trouble in the market, such as rising foreclosures, that could stall a comeback.

Here are snapshots of some indicators of the local real estate market’s health.

Home sales

Sales of existing homes were down about 4 percent year-over-year in the third quarter, compared with a 14 percent drop during the first six months of 2008, according to the Realtors Association of Lincoln.

“It’s not super great, but it’s not as bad as the national media make it out to be,” Roberts said.

The new home market is a much different story, though, with sales down 32 percent in the third quarter and 32 percent for the year.

“Existing homes sales are pretty stable,” said Julie McManaman, an assistant broker with Home Real Estate and president of the local Realtors group.

“Our big concern still is that the new construction market is way off.”

Home prices

Lincoln was one of the few markets in the country in which  home prices actually rose in the third quarter, compared to the same period last year.

According to the National Association of Realtors, Lincoln’s median sale price for an existing home — meaning half sold for more and half sold for less — was $140,100, a 0.9 percent increase over the third quarter of 2007.

According to the Realtors group, Lincoln was one of only 28 cities surveyed where the price increased. In Omaha, the median price dropped 3.7 percent.

Roberts said that gels with what he’s seen.

“Our prices compared to last year are up slightly, although they’re still down from two years ago,” he said.

Nationally, prices declined 9 percent in the third quarter, and they dropped 5.5 percent in the Midwest, according to the Realtors group.

Not all the news on local home prices is good, though.

Zillow.com, an online real estate service, says that 84 percent of homes in the Lincoln Metropolitan Statistical Area have lost value in the past year and 19 percent of those sold actually sold for a loss.    The Lincoln MSA is Lancaster and Seward counties.

Zillow also reported that 20 percent of all Lincoln MSA homeowners who bought their home in the past five years have negative equity, meaning they owe more on their mortgage than they could sell the home for.

Foreclosures

Some of those homes sold for losses were probably foreclosures, which appear to be on the rise locally.

Gary Thompson, who specializes in selling foreclosed and bank-owned properties in Omaha and Lincoln for Realty Center Midwest, said he’s seen a big upswing in listings recently.

“In the last 30 to 60 days across the board we’ve seen an increase of 10 to 15 percent,” he said.

And those foreclosures, on average, sell at a 20-30 percent discount to market prices, Thompson said.

Foreclosure tracking company RealtyTrac caused a bit of a stir recently when it reported that Nebraska had one of the lowest foreclosure rates in the country for October.

But RealtyTrac tracks foreclosure filings in only a handful of counties in the state, and even in those counties, it does not collect all the foreclosure data available, as it does in some areas around the country.  That leads to less than complete results.

Local data back up Thompson’s contentions

There have already been more than 1,100 default notices issued in Lancaster County so far this year, almost 100 more than were issued all of last year.

Default notices are issued when homeowners are at least three months behind on their mortgage payments and are usually considered the beginning of the foreclosure process.

Another indicator of the forclosure process, trustee’s deeds, are way up this year.

There have been 835 trustee’s deeds issued so far this year, compared with 808 for all of last year.

Though trustee’s deeds are issued whenever a property is transferred to or from a trustee, most come out of foreclosure cases, because lenders usually appoint a trustee, such as an attorney, to handle the process.

The number of houses being repossessed by banks also appears to be on rise.

Several large national and international banks have already sold more property in Lancaster County this year than all of last year.

For instance, British bank HSBC, one of the largest in the world, has sold 70 homes so far this year in Lancaster County and is listed as the owner of another 12. Last year, the bank sold 58 local  properties.

Deutsche Bank, an international bank based in Germany,  has sold 60 properties locally this year, one more than all of last year, and it is listed as the current owner of another 29 properties.

Another large bank, U.S-based Bank of New York, has sold 26 local houses so far this year, compared with 22 in all of 2007. And the bank is listed as owner of an additional nine properties.

Thompson said he doesn’t see the foreclosures slowing down, except during the holidays, for at least several months.

“We don’t expect to reach our highest inventory until April or May,” he said.

Still, Thompson said the foreclosure problem in Lincoln in Omaha is nowhere near what it is in hard-hit states such as Florida, California or Nevada.

According to Zillow, 7.5 percent of Lincoln MSA home sales are foreclosures, compared with 18.6 percent nationally.

Homes on the market

People having to sell their homes, due to foreclosure or some other reason, has helped contribute to a consistently high level of inventory.

The number of homes listed for sale has dropped some in the past couple of months but continues to hover near record levels.

As of Nov. 15, there were 2,302 homes listed for sale in the local Multiple Listing System, 136 fewer than on Aug. 15.

Looking ahead

Realtors interviewed by the Journal Star are predicting a breakout year in 2009.

“I think things are ready to explode,” Nebraska Home Sales’ Rodenburg said.

He said 2009 could be a very good year, especially if mortgage lending loosens up.

Roberts, of Lincoln First Realty,   is predicting that home sales could be up as much as 5-10 percent in 2009.

“I’m expecting good things for next year,” he said.

McManaman, the Realtors Association president, is a little more cautious but still optimistic.

“We’re hopeful that 2009 will turn a corner for us, that we’ll get stable pricing and new construction back on track.”

Reach Matt Olberding at 473-2647 or molberding@journalstar.com.