East Texas Business

By GREG JUNEK
Business Editor

Home sales, although down a bit in number in Smith County for the first quarter, are on par with the 2007 average price, despite dismal news from some other parts of the nation, figures show.

Through March, buyers had closed on 399 homes, according to information from the Greater Tyler Association of Realtors. Last year during the same period, the number was 454 units.

The year-to-date average sales price was $167,987, compared to the average price of $166,522 through March 2007.

"We just had the best quarter in my company's history," said Jason Wright, GTAR 2008 president and owner of Century 21 First Group in Tyler and Lindale. "Compared to last year, we increased sales in all major categories by about 11 percent."

Activity in Smith County as a whole dipped slightly, but it did not crash, Wright said.

This year, at the Texas Association of Realtors winter meeting, TAR officials called the local association presidents into a room for reports on how their regions were faring, he said.

"It was overwhelmingly positive, even to the extent where Randy Jeffers (TAR board chairman) said, 'We knew Texas was still in good shape; we just didn't know that it was in this good of shape,'" Wright said. "The only struggles that you hear about are the national new home builders who literally just went out there, took investment capital and built these housing farms; they just threw rooftops all over the place."

That is not hurting the local real estate business, but Wright said he imagines some of the national builders are feeling a pinch because of a housing glut.

Fellow Realtors locally and statewide are telling him their businesses are doing well. And, he added, Realtors are honest with each other.

"Whenever we're in those (TAR) meetings, it's all about no sugar-coating, here's what's going on," he said.

That is not the story everywhere.

Last week, the National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell to 84.6 from January's upwardly revised reading of 86.2. The index stood at 107.6 in February 2007.

A reading of 100 is equal to the average level of sales activity in 2001, when the index started. The previous low was August's reading of 85.8, recorded at the height of the credit crunch.

With house prices falling and credit continuing to tighten, many economists say the housing market is likely to worsen in the coming months, though some remain hopeful about a recovery in the second half of the year.

In Texas, Realtors have had to fight to distinguish their region from other areas that are receiving heavy media attention. Wright said, through his conversations with people in Tyler, many believe that local real estate market conditions are not unlike those in the news reports.

"The national media pretty much thinks the sun rises and sets on the East and West Coasts, and here in the middle we're just kind of insignificant," he said. "It has really hurt us because people are shocked when I tell them how well our company has done."

The average home price for each of the first three months in Smith County dipped more than $7,000 in January, to $180,251, according to the GTAR report. February's average price was $154,950, more than $2,000 less than the average price for February 2007.

But the average home price in March increased about $12,000, to $173,183.

Wright said this is not unusual, and the sale of a couple of pricier homes can significantly change the average price in a given month.

The GTAR reported the median price through March was $144,500, while through March 2007 it was $135,000.

Wright said he is noticing homes are appreciating at a slower rate, because the margins that were once in new construction have dwindled somewhat. But that is a cyclical phenomenon, and he anticipated the appreciation rate should eventually pick back up.

"Even Tyler, with a market as strong as we have, I think that anyone would agree that the $400,000-$500,000 price range became overbuilt," Wright said. "A new home that a builder used to get $130 a (square) foot for, now he's selling for $115 a square foot, thus making that existing home that you could sell for $110 a square foot harder to sell, because now for $5 more I get a brand new house."

Wright said many people are moving up to other homes in Tyler, making the competition to sell their current homes stiffer. He said he also believes people are pulling back slightly - maybe about 1 percent - on the asking price because they believe they must in order to sell the house.

"The psychology is, 'The market is bad, so I can't get as much for my house,'" he said.

Things are happening, however, that could reverse this line of thought, Wright said. Builders are not constructing so many speculative homes and people living where the housing market has declined are moving to East Texas.

"Right now, within the past month, I'm going to be closing deals with buyers from Chattanooga; Naples, Fla.; San Diego, Calif.; and Nashville, Tenn.," he said, adding a lower cost of living is the main reason these people have decided to relocate to the Tyler area.

"The home you get for the money and not having to take a big pay cut, ... it makes it attractive," Wright said.

Last year reports surfaced of some people with less-than-perfect credit seeing their mortgage payments surpass their ability to pay. Local authorities said many of these borrowers bought houses with subprime loans because they could not have qualified for a prime loan.

The subprime sector is a lower quality loan sector for individuals whose credit is not good. As a result, lenders often charged higher interest rates or outfitted borrowers with variable interest rate mortgages.

But lenders have since toughened their qualifying standards, which Wright said is a good thing because borrowers who are well qualified for a home loan now will more likely be in a position not to default on it later.

"What we're seeing is that borrowers have to bring some money to the table," Wright said. "You had people literally moving into houses and just picking up payments, going to closing with no money and getting into a house."

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