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Farragut-area existing home $ales on the rise

Farragut developers and realtors are seeing a new housing trend in Farragut and the Greater Knoxville area — and it could be one that means an uptick in the residential market after a long downhill slide.

“There is no doubt that this is one of the best times to buy real estate since World War II,” R. Knick Myers, of Myers Bros. Holdings, said.

Emma Bea Stallings, with Realty Executives, agreed.

Stallings said Knox County’s MLS data show residential home sales were up from July to November.

“If you go from the first of July through [Nov. 28], we’re up 10 percent. That’s great news for our area,” she said. That translates to 1,916 homes and condominiums sold in the Greater Knoxville area so far this year.

Stallings pointed out, though, that from January 2011 to the end of November, overall sales were down.

According to Farragut town administrator David Smoak, Farragut has seen more residential development this year than any since 2008. This year, 2011, has seen 46 new homes built, up from 34 in 2010 and 28 in 2009, but not quite catching 2008, which saw 53 new homes constructed.

All of this activity is leading to an interesting situation.

Sales are up, prices are down, and recently there is a shortage of new homes for sale.

Myers said, “For the first time since 2008, we have willing and able buyers who are simply unable to find what they want in the existing inventory of actively marketed homes in this area.

“Homes have sold and people continue to move to the Knoxville area; however, very, very few new homes have been built for purchase.

“Today, people who want to buy new are forced to either build or settle for a pre-lived-in home.  Either way, the inventory is shrinking with very little replenishment of new homes expected in the next few years,” he added.

With historically low interest rates and a greater recent willingness among bankers to dole out loans, more and more people are buying homes.

But not many developers are building speculatively.

“Builders are not building as much,” Stallings said. “A lot of builders are getting into renovating.”

That shortage of available new homes might get worse before it gets better.

“I don’t anticipate a material increase in speculative homes being built until well after the 2012 elections,” Myers said.

High residential activity might seem counterintuitive to someone who’s watched the house down the street sit on the market for months.

And there are homes that aren’t selling.

But those homes are “stale inventory” that likely would not sell well in any economy, Myers said, whether because of condition, location, layout or price.

But “homes that show well, are in good locations, appeal to a broad range of buyers and are priced correctly ... [are] in high demand, and the number of days they are on the market as compared to the average indicate that fact,” he added.

So are homes selling for what they’re worth?

That could be a loaded question.

“I would say that that homes always sell for what they are worth at that moment in time. [That’s the] principal of supply and demand,” Myers said.

“However, if you ask me if they are selling for less than what they cost to replace, the answer is ‘yes.’  In fact, this has created a huge problem for insurance companies who insure residential homes. Most people will insure their home for what they paid, and not what it costs to replace,” he added.

And not being able to sell a home for what it’s presumably worth has led to a “shadow inventory,” in which sellers take homes off the market until they can sell them for what they think they’re worth.

Stallings said she’s seen that happen.

“There are people who are removing their houses from the market because they are distressed, because they can’t get what they want for their houses,” she said.

“When people bought at the height of the market, we can’t get [those prices] for houses [anymore].

“Depending on when sellers bought, they conceivably will not get as much money for their houses as they paid for them. ... What it means for buyers is that this is a good time to buy,” she added.

A shortage of new homes and an inventory of homes being taken off the market could make it difficult for buyers to find what they’re looking for.

But Myers points out that if someone wants to sell, they will.

“From a buyer’s prospective, the market [now] is similar to a seller’s market, in that if a buyer does not like what is on the market this month, then wait a month, as the inventory will change,” he said.

And the shadow inventory of homes could be precisely why housing prices are so low.

“As long as the shadow inventory exists, the prices are going to remain low,” Myers said.

Stallings said, “I’ve seen business improve [this year]. And I think people are getting settled into the new normal ... they’re coming out saying ‘This is the way things are going to be for a while.’”

But she won’t presume to predict the market’s future.

“If I knew the answer to that, I’d have my crystal ball,” she said.


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