Orange County's housing market is in a slump

Hot home market By Micahel Levensohn Times Herald-Record mlevensohn@th-record.com
Related stories• Home prices aren't falling, but real estate sales are• Home-buying lessons from a happy family Orange County's housing market is in a slump. Or maybe it's a correction, or a flattening out. Call it what you will. The days of sellers naming their prices are over. "We're having an adjustment period, which is typical after a sustained growth period like we've had," said Chris Scibelli, chief executive of Keller Williams Realty's Orange County operations. "We definitely see a flattening. At some price points, they're actually coming down." It's taking longer for houses to sell, particularly in the higher end of the market. In the past couple of months, "Just Reduced" signs have been popping up all over the place, although sometimes another euphemism is employed: "Price Improved," for instance. "There are more price reductions than new listings coming on the market every day," said Scibelli, who recently knocked $30,000 off the price of a Cornwall colonial, and landed a buyer almost immediately. Realtors say houses are still selling, and the numbers back them up. But more and more buyers are balking at price tags that were unimaginable even to sellers just a year or two ago. "I think there's some shell shock at the price of houses," said Robin White, an associate broker with Prudential Rand Realty. "I think some Realtors were a little more ambitious … in their pricing, and the buyers are saying no. They don't want to be house-poor. They still want to be able to buy furniture." It appears that buyers, on the whole, have reached the outer limits of their budgets, even with the benefit of historically low interest rates and liberal lending practices. "We're doing a lot of 100 percent financing programs. It's 100 percent financing, plus you can build in a 3 percent seller concession," said Jack Fanning, a mortgage consultant for Ulster Savings Bank. "I'm throwing around mortgage payments today of $2,000 like they're nothing." For years, local real estate prices have benefited from a perfect storm of conditions, notably cheap debt and relatively low prices compared to New York City and its suburbs. The median price of Orange County housing nearly doubled from 1999 to 2004, according to the Orange County Association of Realtors. Year-over-year, prices are still up more than 10 percent, but that increase reflects a big jump between the second and third quarters of 2004. In the three quarters since, Orange County's median price – the price at which half the sales are for more and half for less – has risen by an average of just 1 percent per quarter. "I think it's just a correction, just like the stock market has to correct itself every once in a while," White said. "It's a correction, not a crash." "Crash" might as well be a four-letter word in local real-estate circles, where folks who have been around a while recall the late 1980s, when the bottom fell out of the market. Some parts of the county didn't recover from that collapse for a decade. So, is this just a hiccup in a market headed for continued growth, or has the market topped out? Only time will tell. Industry insiders say they expect a return to more normal returns – maybe 5 percent annual price increases instead of 25 percent. "I don't see a 1987 in our near future … but I definitely would see some pressure on prices," said Ann Garti, chief executive of OCAR. "I would be a little cautious right now."