Northern KY: Home sales are now lukewarm
Kentucky Post – After several years of setting records for home sales, the market appears headed for a breather.
A slowdown in home sales, expected this year, could mean homebuyers regain the upper hand from sellers and could affect other parts of the region’s economy.
Greater Cincinnati just completed its sixth consecutive record year for homes sold, 26,534, and total sales value, $4.75 billion. Northern Kentucky set its fourth consecutive record with 6,965 sales worth $1.07 billion, marking the first time Northern Kentucky topped the billion-dollar mark in sales.
But there are signs the market is cooling. Regionwide, sales of existing homes began tapering off in the last quarter of the year, with minor increases in October and November, then a 1.1 percent decrease in December from the year before.
Permits for new home construction also fell in Ohio and Kentucky compared to previous years. In Northern Kentucky, single-family building permits for 2005 declined by 21.6 percent compared to the all-time record year of 2004, when 2,743 permits were issued, according to the Home Builders Association of Northern Kentucky.
The existing inventory of new homes also suggests that the market has softened a bit. “There are more new construction houses that are ready to move into on the market than there were at this time last year,” said Diane Victor, president of the Northern Kentucky Board of Realtors.
The Home Builders Association of Greater Cincinnati said single-family home permits fell 13 percent in December to 382 from 440 permits in December 2004.
For the entire year, new home permits declined by 2.4 percent to 6,414, said the association, which represents builders in Hamilton, Butler, Clermont and Warren counties.
Uncertainties about the economy and an unemployment rate that’s higher than it’s been in some time have prompted some would-be buyers to hold off, said Dan Dressman, executive vice president of the Home Builders Association of Northern Kentucky: “When people make that long-term investment, often the biggest investment they’ll ever make, people have to feel comfortable with the economy. Many builders are sitting on inventory.”
Job losses, growth control initiatives that have slowed development, rising interest rates and increasing prices for building materials all have had an impact on new home construction, said Cold Spring builder Jim Cutter, president of the home builders, which represents the interests of the construction industry in a 10-county area.
Some observers have speculated a real estate “bubble” might burst and send prices crashing in some of the country’s high-end markets. But an expert who follows the Greater Cincinnati market believes the region is virtually immune from a bubble that may be near at a bursting point in California, Florida and Nevada.
“There is no chance of a housing bubble here – not in our lifetimes,” said Norman G. Miller, professor of finance at the University of Cincinnati and the director of UC’s real estate program. “People here have nothing to fear like they might in Florida or California.”
Miller and a colleague have ranked Greater Cincinnati No. 284 out of 379 metropolitan areas in the country in terms of the likelihood of an overnight real estate crash. Gradual price increases, conservative financing strategies and a relatively low number of risky loans, as well as a good balance between the supply and demand, all contributed to Cincinnati’s stable market, Miller said.