At the risk of sounding like a broken record, local real estate expert Steven Dotson continues to emphasize an improvement in home sales.
According to John Goodman, realtor and partner in Red Realty, realtors have seen a dramatic increase in closings in 2012. (Photo submitted)
Rutherford and surrounding counties showed a year-over-year increase in home sales, according to data recently released by The Red Report.
Dotson, president of Red Realty, pointed to a 26 percent increase in year-to-date closings for Rutherford, Williamson, Wilson and Davidson counties combined. He noted, "prices are starting to edge up and inventories continue to deplete."
"I don't want to show too much excitement, but this year has been a tremendous turnaround from the previous two to three years, so I can't help but feel excited to see the market turning around," Dotson said. "It's been a long time, and nobody wants to step out and say things are officially better, but based on these numbers and conversations with those in (and) around our industry, you would have to say we are all feeling very optimistic these days."
Sales in Rutherford County improved 29 percent to 375 in July, compared to 290 the same time last year. Williamson's sales jumped 21 percent from 337 to 407, while Davidson and Wilson counties experienced 32 percent and 14 percent increases to 687 and 180 from 521 and 158, respectively.
While year-over-year increases were substantial, month-over-month improvement was modest.
Home prices also experienced increases ranging from 1 percent to 7 percent across the board, with the exception of Wilson County, which dipped 2 percent after a steep increase the month prior.
"Prices are looking much better overall, as some price ranges and areas are doing very well," Dotson continued. "Prices would be recovering much quicker if fair appraisals were being done by local, experienced appraisers. We are still seeing too many out-of-town appraisers appraising quality properties well below their current values."
Closed sales in Rutherford and Davidson counties were up only 3 percent from June to July, while Williamson County saw sales increase by 6 percent. Wilson County's sales were actually down 9 percent, but county's housing market had stronger months earlier this year.
Another positive indication of the local real estate market continues to lie in pending home sales. The Red Report shows Rutherford County pended 409 sales, up from 13 percent in June, and Williamson County pended 456 sales, up 7 percent from June. Davidson and Wilson counties' pending sales were level from last month.
"The pendings for Rutherford and Williamson show that these two counties will continue with a strong couple months ahead, while Davidson and Wilson may be leveling off or showing a modest adjustment," Dotson explained. "We have all been waiting for the seasonal pull backs in the market this year, but we haven't really had any yet. This year has shown improvements each month."
Nearby markets show improvement
Local home sales mirror those of greater Nashville, which reported 2,574 home closings in July, according to figures provided by the Greater Nashville Association of Realtors. This represents a 27.4 percent increase from the 2,021 closings reported for the same period last year.
Year-to-date closings for the Greater Nashville area are 14,568. That is an increase of 25 percent from the 11,652 closings reported through July 2011.
"The July homes sales increase reflects the sustained strengthening being experienced in Greater Nashville market this year," GNAR President Kendra Cooke said.
"This is the highest number of closings in one month since June 2008."
Cooke added the available inventory in Greater Nashville is down 16 percent from last year.
"Frankly, some additional inventory would be welcome. There is just a seven-month supply overall, and only about a 5-month supply of single-family residential inventory," she said.
Tennessee as a whole has shown overall improvement over the past three months, newly released data from MTSU's Business and Economic Research Center shows.
"On balance, the Tennessee housing market showed very modest improvement in the second quarter, following a stronger first quarter," the report states. "Housing construction continued to grow, rebounding mildly from very low levels, but real estate transactions and mortgage activity fell."
Home sales rose in Nashville, but not in Memphis or Knoxville. Mortgage delinquency rates fell again, continuing a long trend of improvement.
"The bottom line is that the slower rate of improvement in the housing sector is most likely due to lackluster job growth," the report maintains. "Without an increase in the rate of growth of job creation, maintaining the present level of sales and construction activity will be challenging."
Appraisals proving problematic
The local housing market isn't without negatives. Rutherford County's Dotson says the only negative feedback he's receiving "revolves around home appraisals."
"Appraisals continue to be the No. 1 hot topic among the real estate industry these days," he continued. "The local and national Realtor and Builder associations are all working on this issue that continues to threaten the real estate recovery."
Dotson explained how supply and demand indicate the market could have higher prices, but appraisals are keeping prices from matching the supply and demand of the market.
"There are too many multiple offer deals that end up with appraisals 10-20 percent below the sales price," he says. "No matter what the situation is, the price ends up going down by all or some of the difference, which keeps the actual market value from being realized. We find that the buyers are just as frustrated as the sellers with the low appraisals because they end up losing their contract on their dream home because they can't get it financed for the contracted price."
According to Dotson, there are two main reasons for bad appraisals: the appraiser is not local and doesn't know the local market conditions or the appraiser may be local, but doesn't have the experience to handle today's market conditions.
"Appraisers should be local and experienced," Dotson advised. "I hear too many stories of an out-of-town appraiser who doesn't know the local market conditions or where to find the appropriate comps being allowed to be on the rotation of certain banks."
He says Realtors and the general public are beginning to put pressure on mortgage companies in an effort to bring about changes.
"All mortgage companies are required to use an appraiser rotation system, so they aren't hand-picking their favorites," Dotson said.
"Some do a great job to make sure those on rotation are qualified, and several of them are doing a terrible job by either outsourcing it to a group who is not local or doesn't check their experience. Mortgage companies have to manage their rotating appraisers better so that the local/experienced appraisers are the only ones in rotation."
Dotson's advice to buyers and sellers is this: Sellers must negotiate or add language in their contracts that they must approve of the bank/mortgage company that the buyer is using. The seller has the option to ask the buyer to use a competent bank/mortgage company that hasn't had appraisal issues, or the seller has the right to cancel the contract.
In addition to the continued improvement of single family home sales, the commercial and land markets are also looking up. In fact, commercial year-to-date sales volume has doubled from $15.6 million to $31.3 million, according to The Red Report. Land year-to-date sales jumped 53 percent, from $46.6 million to $71.5 million.
"Wow, I knew commercial and land deals were up, but I hadn't looked at the percentages until now," Dotson said.
"I personally deal mostly in land, so I can say that I've done more deals this summer than I have done in a long time. Land that has sat with no activity for years have started to see more lookers, offers and contracts. Other friendly competitors are telling me that residential lot sales are starting to sell again at decent prices. And most agree that land will be the last to recover, so the increase in commercial and land (sales) is a huge indicator of a nice recovery."
Looking forward, Dotson anticipates continued improvement in all areas of the real estate market, as long as the seasonal dips stay at bay.
"I keep saying we'll see our regular seasonal pull backs, but we haven't seen them this year," he said. "Maybe the expected seasonal dips won't show up this year as we continue in an upward pattern."