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Rock County home sales slump continues

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Jerry Morse

JANESVILLE — Jerry Morse did something in February that he hadn’t done since the 1970s.

Morse assisted with the sale of a Janesville house for $19,000.

“It needed some work, but it was probably worth $50,000,” said Morse, an owner of The Morse Co. in Janesville and the president-elect of the Rock-Green Realtors Association. “Five years earlier, it sold for $82,000.”

While Morse’s experience might be uncharacteristic, it’s indicative of the state of the local housing market.

A continued rash of short sales and foreclosures pushed the average sales price for residential properties in Rock County to $95,976 for the first three months of the year, according to the South Central Wisconsin Multiple Listing Service. That’s a 12 percent drop from the first quarter of 2010.

And it’s the first quarterly dip below the $100,000 mark in several years.

“The problem is that our shadow inventory is too high,” Morse said. “These places are being sold for very low prices.”

Shadow inventory, Morse said, is generally defined as properties with mortgages that are more than 90 days in arrears, properties that are somewhere in the foreclosure process and properties that are owned by a financial institution.

It includes short sales and “REOs.”

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. Real estate owned, or REO, is a class of property owned by a lender after an unsuccessful sale at a foreclosure auction.

Last year, about 24 percent of the residential home sales in Rock County were short sales or REO situations, Morse said. Through the first quarter of this year, that number jumped to 30 percent.

“That’s certainly the reason for the lower sales price numbers,” he said.

But the situation seems to be improving, at least for now, he said. Of the nearly 1,300 current Rock County listings, just 169—13 percent—are listed as distressed.

There’s no mistaking that distressed sales affect the overall value of housing in a community. They’re often used as comparable sales when other properties are appraised.

Industry experts say residential real estate will not start to appreciate until an area significant reduces its shadow inventory. In Wisconsin, the National Association of Realtors estimates that will happen in 13 months.

As for the number of sales reported in the first quarter, Morse said there is good news to go along with the bad news.

While the number of sales is down from the first quarter of 2010, it’s about 9 percent ahead of the first quarter 2009. Morse said 2010 numbers, at least for the first six months, are artificially high because they were pumped up by the federal government’s tax credit program for first-time and existing homebuyers.

Morse said industry predictions are for a sales rebound in 18 to 21 months.

He said he’s seeing pockets in the community where inventory is needed.

“I’ve got a buyer who wants a three-bedroom ranch on the east side of Janesville,” Morse said. “There are seven available, and he looked at all of them.

“There’s a need for nondistressed, move-in-ready homes in the $100,000 to $150,000 range. If you’ve got that, you’ll get a reasonable price. Not what you would have got four or five years ago, but a reasonable price in this market.”

Morse said the bottom line is that there are opportunities for both buyers and sellers.

“Buyers can take advantage of lower prices and low interest rates,” he said. “Sellers, if they need to make a move, might not get the price they want, but if they are going to be purchasing another home can save on the price of the new home and enjoy still low interest rates.

“Once the shadow inventory gets sold, buyers will probably face higher prices and higher interest rates, so the next 12 to 21 months will be the time to buy.”