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Regional Spotlight: Cost of New, Existing Valley Homes Jumps, Taking Longer to Sell
Posted By beth On March 13, 2007 @ 2:33 AM In Real Estate,Real Estate News | Comments Disabled
RISMEDIA, March 13, 2007-(MCT)-Existing home prices shot up 11% in Lehigh Valley, Pennsylvania in February, while the average cost of a newly built home surpassed $500,000 for the first time.
The latest snapshot of the housing market wasn't all good news. The number of houses sold continued to fall, and properties lingered on the market longer, according to statistics released by the Lehigh Valley Association of Realtors.
The average price of a new four-bedroom home rose 19% in February to $509,000, based on 11 sales. New homes, particularly in suburban townships such as Upper Macungie and Forks, have proven a draw for people relocating here from New York and New Jersey.
Many of these newcomers to the Valley have been able to splurge on upgrades such as granite countertops and in-law suites because they often sold their previous homes for twice as much as houses cost here.
Local builders say the escalating cost of land is the main factor in the higher price of new homes. National builders that have entered the market in the past five years have paid higher prices for land. And the amount of available land has plummeted, which has further accelerated the runup in prices for lots.
"They are paying $30,000 more per lot than they should be," said Frank Alexander, head of Anthony Builders of Freemansburg, and president of the Lehigh Valley Builders Association.
The average price of existing homes was $222,000 last month.
The first two months of the year have provided a mixed outlook for how the market will fare in 2007. In January, existing home prices rose 1% to $215,000, and the average price of a new home fell 6% to $387,000, compared with the same period last year. Because the number of new homes sold each month is comparatively small, the average price can be volatile month to month.
The pace of new and existing home sales has been slowing since the middle of 2006. Alexander, of Anthony Builders, said his company sold all of its 17 homes by April of last year, and did not sell another home for the rest of 2006.
In February, homes stayed on the market an average of 65 days, up 16 days from the same period last year.
The Lehigh Valley remains attractive to home buyers, particularly those relocating from New Jersey, where houses still cost much more. However, real estate agents say the market is calming down after a feverish period in 2004 and 2005. The shift has favored buyers, who now have more homes to choose from and more time to look. Meanwhile, some sellers have been vexed, as their homes take longer to sell.
"The market is not falling apart," said Linda Stocklas of Prudential Patt, White in Hanover Township, Northampton County. "This is a market that is stabilizing. People will continue to make money on their homes."
That's certainly been the case for several years Average prices for existing homes have risen 10% or more in each of the past four years. Typically, homes in the Lehigh Valley appreciate about 5% a year.
Since 2000, average prices have soared 80% here. Anyone who bought a home in Lehigh and Northampton counties in 2000 for $150,000 now has a property worth $270,000, assuming it appreciated at the average rate.
It's unclear if home prices will continue to rise at double-digit rates for an unprecedented fifth consecutive year. The peak selling period, which typically takes place in the late spring and summer, is still a few months off.
Real estate agents have said they expect sales to rebound in the beginning of this year because many buyers put off purchases during the last quarter of 2006. Home sales fell last year for the first time in at least 10 years.
A large supply of homes on the market has contributed to fewer sales. New listings outpaced home sales by nearly two-to-one last year, according to the Realtors association. That's partly because the local housing stock has swelled, with the construction of dozens of new subdivisions in the last 10 years.
Last month, there were about 2,100 homes for sale through real estate agents, up 11% from the same period a year ago. By comparison, the Realtors association reported 475 home sales last month. The big inventory has concerned economists, who say the natural law of supply and demand may hurt prices.
"As the number of houses on the market continues to significantly exceed the number of sales, like any other market, we will start to see more softness in prices," said Bethlehem economist Kamran Afshar, in an e-mail message. "The listings are continuing to increase even when the number of units sold is dropping."
While the pace of sales is slowing in the Lehigh Valley, the market for homes remains stronger here than in other areas. Last year, the Lehigh Valley was ranked No. 2 in the state and No. 61 nationally for annual price increases among the top 282 metropolitan statistical areas, according to federal housing statistics.
The Valley moved up 30 spots in the national ranking from last year, despite a slower rate of appreciation. This indicates that other housing markets cooled even more.
The cost of homes and the pace of sales in New Jersey will have an impact on the housing market in the Valley. According to federal statistics, a homeowner who paid $100,000 for a home in Pennsylvania in 1980 now has a house worth an estimated $409,000. A homeowner in New Jersey who paid the same amount in 1980 now has a home worth $585,000, or 43% more.
Copyright © 2007, The Morning Call, Allentown, Pa.
Distributed by McClatchy-Tribune Information Services.
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