Archive for Wednesday, December 6, 2006

Realtor blames fuel prices for slowdown

Rentals, homes for sale in Tonganoxie moving more slowly than last year

December 6, 2006

Whether the signs say "For Sale" or "For Rent," owners report it's taking longer to move houses these days.

Sales may have been sluggish this year, but at least one Tonganoxie Realtor is optimistic about 2007 home sales.

One thing that took a bite out of home sales this year, according to Realtor Dan Lynch, was the increase in gasoline prices. In 2005, the average price at the pump was about $2.25. This past July, gasoline prices peaked at more than $3 a gallon.

Lynch said this didn't slam the brakes on home sales, but it did slow them down.

"You just had to find where the niche was in the market," Lynch said.

And that niche, he said, often meant prospective buyers were looking for lower-priced homes.

For instance, Lynch said in 2005, he sold 21 single-family homes in the Tonganoxie subdivision Jackson Heights, near County Road 5 and Parallel Road.

"This year I think we sold half that," Lynch said.

But just west of Jackson Heights is a town home development -- Willow Pointe subdivision.

Town homes, which cost less per unit than single-family homes, are more affordable to first-time homebuyers or homebuyers on a fixed income.

And they remain popular, Lynch said.

"Thirty-two of those units have closed this year," Lynch said. "That's 32 new families that have moved into the area, so that's been very successful."

However, Lynch noted, since summer, Tonganoxie area home sales have been a little slower than in the past four years.

"Probably, we're going back to more normal times," Lynch said. "The sales of the past are cooling off a little bit."

But Lynch is positive about next year's real estate sales.

"I'm still thinking it's going to be good," Lynch said. "I think we've got a lot of great things in this area to keep people coming to this area. Legends is only 12 minutes away."

The Legends at Village West is the new shopping center near Kansas Speedway in Kansas City, Kan.

And, Lynch said, for commuters the drive to the Kansas City area is reasonable.

"We're such an easy commute," Lynch said. "119th and Renner is 35 minutes away from Tonganoxie. I think people are still discovering Tonganoxie and I think that's the reason why sales have remained solid this year."

Terrific time for buyers

Steve Jones, a Lawrence Realtor with Coldwell Banker McGrew, has been watching the housing market.

"It's a little slower than it's been and I think that's pretty much maybe nationwide if not just in Kansas," Jones said. "But we're still pretty positive and there's still property moving."

However, he said sometimes that takes some enticement.

"Many sellers both of new and existing homes have either lowered their prices or are offering various incentives such as paying closing costs and prepaid items -- part of the first year's insurance premium, appraisals, various items that would come up on their loan application."

Jones said he was showing homes in Tonganoxie that had been on the market since early summer. The homes, he said ranged from $159,900 to $169,000.

Situations like this hurt builders who must pay interest on the money they borrowed to build the homes.

Prospective homebuyers should be encouraged by interest rates, Jones said. He noted that Monday morning at least one area bank was offering home loans at 5.75 percent interest.

"It's a terrific time for homebuyers, it really is," Jones said.

The other side

Sam Wiles, who's been building Tonganoxie houses for more than 30 years, sees the other side of the housing market -- the side that builders fear -- speculative homes that take longer than expected to sell.

"There's too many houses on the market," said Wiles, who finished his last spec home about a year ago.

It's still for sale.

A builder's wait for a buyer can be costly.

There's utility payments -- to keep the house cool in the summer and warm in the winter -- as well as taxes, insurance and interest.

"Three months on a house will run you about $3,500 in interest so it doesn't take long to eat your profit up," Wiles said.

For instance, Wiles said he lost about $40,000 on one of his spec homes.

Rental market

When houses don't sell right away, builders may look for alternatives.

For instance, Tonganoxie builder Richard Faherty was concerned a house he'd built through Joy Contracting wouldn't sale -- or rent.

After months of not selling, Faherty put the house up for rent.

And eventually a renter, whom out of respect Faherty prefers to call a "customer," came around.

"The Lord sent me mine," Faherty said of the person who rented a new house. "All I know is pray hard."

Faherty, who describes himself as a small contractor, doesn't believe Tonganoxie is overbuilt.

"A lot of people are trying to move from locations in the city into the rural areas," Faherty said. "... I don't see the driveways being empty very long."

Jeanne and Frank Smith have five rental houses in Tonganoxie. Of those, one has been vacant for a month.

"The rental market has definitely changed," Jeanne Smith said. "I'd say eight years ago we would be getting a million calls and we'd have the pick of a lot of good renters."

When interest rates for home loans plummeted several years ago, things started to change. People who had rented suddenly qualified for home loans, so they were able to buy rather than rent.

"It was like lifting the drain out of a sink of water," said Smith, who has been in the rental business with her husband for about 18 years.

Compounding that, a building boom exploded in Tonganoxie -- particularly with new duplexes and townhomes.

"And then it was just totally flooded," Smith said of the rental market.

As landlords they know how much they can charge for rent.

"You can't go over the ceiling," Smith said. "If you do you can't get renters. They can go and buy a house for that price. I feel like we're stuck, not raising the rent. And taxes and insurance continue to rise."

And as always, houses require maintenance.

"The costs -- carpet -- everything has gone up in price -- everything," Smith said. "But you can't really raise the rent."

A few bumps

Marilee and David Drennan own five Tonganoxie rental houses. Like the Smiths, they own older Tonganoxie homes.

They don't have much problem finding renters.

"Everything that we have is under $600 a month," Marilee Drennan said. "I think that's a big part of it."

But certain times of the year it's difficult to find renters, especially now, with the holidays approaching and school at mid-year. The Drennans have one house that's vacant and she expected it would be a month or two before they're able to rent it.

Even so Drennan was optimistic about the rental business.

"I would probably buy more rentals," Drennan said. "It's just sometimes you hit a few bumps. ... They're a very good investment, that's a good way to build our wealth if you can buy real estate under the appraised value."

Correction curve

From a banker's perspective, the housing market may be making a correction.

Steve Christensen, First State Bank and Trust senior vice president, heads up the commercial loan department, which sells money to builders to build spec homes.

Christensen said he's seeing extended marketing times on homes, which means in some cases builders must extend the length of their loan -- costing them more in interest charges.

"Sometimes it's as long as six months on some spec homes," Christensen said.

But he said homes are selling, even if at a slower pace than before.

"The inventory in town has shrunk somewhat from what it was a year ago, which is probably a good thing," Christensen said of unsold homes. "The market needed to correct."

Not all sales successful

Susan Nester sees another side of the market -- home mortgage foreclosures.

Nester oversees sheriff's sales for the Leavenworth County sheriff's department.

The number of sales, countywide, increased to 153 in 2006, compared to 109 in 2005.

"Most of these are all mortgage foreclosures -- people that are not able to pay their mortgages," Nester said.

Of this year's sheriff's sales, about 15 were in and near Tonganoxie. About 12 were from Basehor, 11 from Lansing, one from McLouth, four from Bonner Springs and two from Easton. The rest of the sheriffs sales were on property in Leavenworth, Nester said.

Jerry McPherson, a loan officer at Community National Bank, said it can take up to a year and a half to complete the mortgage foreclosure process. That includes a three-month redemption period -- after the sheriff's sale -- in which the former owner can make all the back payments and keep their property.

What some people may not know is that during the mortgage foreclosure process, the owners can stay in the house.

"They can live there that year and a half and not make any payments and not have to take care of the house," McPherson said. "So the house is not usually in that good of shape when you get them back."

McPherson said he understands why there's an increase in mortgage foreclosures.

"The economy is not quite as strong, and I think sometimes people fall for the low rates," McPherson said.

Depending on the type of loan, low interest rates can climb, leaving homeowners with higher payments than they'd planned on.

"We've been pretty lucky for we haven't had to take back a lot of houses," McPherson said. "We're keeping our fingers crossed on that one."

Commenting has been disabled for this item.