Prospect Market Watch Blog

The median price of a home in the Louisville area has risen nearly 5 percent a year over the past two decades — better than inflation, and about the same as the national rate.

And even this year — in the midst of a national housing downturn — the metro area is on track for a median price increase of at least 1 percent, according to the Greater Louisville Association of Realtors.

But as the national housing slump deepens, properties are sitting on the market longer, making sellers nervous and prompting some to slash asking prices and throw in such incentives as free wide-screen televisions or refrigerators to close deals.

At the same time, local real-estate leaders are pushing the area’s positive numbers, even as they acknowledge the market is tough.

Joe Simms, who just stepped down as president of the local Realtors’ association, urged its members to carry with them at all times a copy of figures showing positive local trends — such as a 2 percent increase in overall home sales so far this year, and inventory levels below the national average.

In a recent letter, Simms advised agents to show the figures to any buyer who wants to make an offer 20 percent below the asking price — and to share the numbers with the media to “straighten them out.”

“When the market slows, then we have to do more selling,” Simms wrote, adding that agents could counter negative publicity by “telling the truth attractively.”

Better than many areas

Louisville’s market is better than that of many cities. Roughly one-third of the nation’s largest metro areas, including nearby places such as Cincinnati, Lexington and Memphis, saw home prices fall in the second quarter of 2007 from a year earlier, according to the National Association of Realtors.

The local real-estate market is approaching the status of the early 1980s, when potential home buyers were scared off by interest rates higher than 16 percent for 30-year fixed-rate mortgages.

Similar loans now are going for less than 7 percent said the local market is hurting just as badly from a combination of problems in the lending industry, such as adjustable rate mortgages and subprime loans made to borrowers with patchy credit.

More foreclosures

Those issues have contributed to a surge in foreclosures in recent months, prompting some of the nation’s biggest lenders to either shut their doors or borrow heavily to stay afloat. Jefferson County, for example, is on track for a record 3,125 foreclosure auctions this year, up from last year’s record of 2,710.

In response to those kinds of numbers, lending standards have been tightened for those with poor credit or low income.

Supply is rising

Meanwhile, the supply of homes on the market nationally continues to rise.

At the end of August, figures from the national Realtors’ group showed it would take 10 months to sell all the homes on the market, more than twice the inventory in late 2005, near the peak of a housing boom.

Louisville’s supply stood at 7.5 months in August, better than the national number but still about 10 weeks more than a year ago. Chuck Kavanaugh, executive vice president of the Home Builders Association of Louisville, said many of the group’s members saw the supply issue coming and cut back on projects.

Members of the Louisville home-builders group took out 30 percent fewer permits for new homes last year than in 2005, Kavanaugh said.

But permits so far this year are about even with 2006, and Kavanaugh predicted that construction next year could be up slightly. Even in a housing slowdown, it’s not uncommon for properties in some parts of the Louisville area to sell quickly, in some cases less than a week.

Generally, though, they are properties in a highly desirable location, with modern amenities, a reasonable asking price and no obvious problems.

“Only the best houses in the best locations are selling,” said David Yunker, an agent with Re/Max Properties East and a 22-year veteran of the local market. “If there’s anything slightly objectionable, they sit.”

Yunker defined “best locations” as those close to good schools and shopping. Numbers from the Realtors association also show that neighborhoods in and around downtown are doing well.

The association figures show, in fact, that while sales of homes priced between $50,000 and $160,000 are down this year, sales are up for homes priced at $160,000 and above.

Semonin President Brad DeVries said he had “no earthly idea” where the Louisville real-estate market is heading, but he predicted it will follow the same steady course it has charted in recent years, with no dramatic price gains but no huge drops, either.

“It’s nothing to jump up and down and scream about,” said DeVries, who oversees 800 agents. “Louisville is just a very consistent market. You can almost set your watch by it.”