February 2011 Asheville Real Estate Summary

In the cycles of real estate (and all cyclical arenas), it is true that you don’t know that you have reached bottom until a TREND of recovery is observed.

This being the case, there is no sign of relief yet in the residential sector in Buncombe County.  One clue is the PENDING ratio (how many properties are under contract in relation to the number of active listings on the market).

In January Buncombe County dipped below the 10% mark for the 2nd time in a year (the other month being July) to 9.6%.  Keep in mind that maybe 70% of those will actually close.  This is where the rubber meets the road and a good snapshot of what is happening right now.  On Feb 12, 2011, this ratio is sitting at 11.1% overall.  Individual price ranges may differ greatly from this number.  This tells you what products are selling and which are just sitting.

Another clue is that 2010 in Buncombe County had the least # of annual sales of the decade, coming in at 2,220 units sold.  2009 came in with a higher # of sales at 2,236 sales.  2006 contained most of the decades’ activity with 4,122 residential units sold. 

This could very well be the bottom, but it is highly doubtful.  There is no evidence telling us that we are close to recovery, especially with the state of employment and government deficit (federal, state and local).  The volatile monthly reports are interesting and important data, however only a trend of 6 months or more are relevant when determining long-term stability, growth or decline.

So where are the numbers right now in residential real estate in Buncombe County?

Active listings: 2,871 (7.15% LESS than Feb 2010)
Units Under Contract: 318 (21.5% LESS than Feb 2010)
Units Closed in the past 6 months: 959 (19.8% LESS than Feb 2010)
Months of inventory on market:  18 months overall (15.5 months a year ago)
Median Price Range: $199,000 ($200,000 in Feb 2010)

For details on your particular price range, see this month’s report HERE

Our median price range shows that our residential values reflect values similar to 2005, which makes sense and shifts us back to pre-bubble reality.

In normal fashion, commercial real estate is lagging behind residential.  The present commercial values are running parallel with 2004 values and opinions say that the worst is yet to come.  We are looking at a minimum of 2 more years of distress and re-positioning in most commercial sectors before showing signs of recovery trends.  This of course varies greatly from market to market.

Commercial values are income-driven.  When businesses are down, they can’t afford to pay the same lease rates.  This forces them either to downsize (possibly moving to another location) or they must renegotiate their present lease rate, which in turn has an impact on the property value from the investors’ perspective.  If the owner is over leveraged or the lease income barely covers the debt coverage, this creates a major problem.  This is a very popular scenario now and is the cause of many properties going back to the lenders. 

Other owners who are able will renogotiate and keep the tenant in place to carry the property’s debt or at least offset their loss. 

With this in mind, this is an optimal time for acquisition by investors and users.  There are many opportunities out there now and more to come IF the purchaser can get the funds.  A user has a much better shot at getting these loans than an investor.  The investor and the property are under a microscope by the lender in order to have the least risk exposure possible.

I recall speaking with an investor (long hold) 2 years ago when I asked if he was making any purchases.  In his calm voice of over 30 years of experience, he said “I wouldn’t touch a thing right now”.  When I visited with him a few weeks ago, it was like talking to a 6-year-old on their way to Toys R Us.  He is making 50 cash offers a week to banks and owners in distress.  According to him, 1 will accept, 2 or 3 will call him back in 30-60 days wondering if the offer is still good.

These are truly the times of opportunity for some and much distress for others.  Welcome to the never-ending REAL estate cycle.