Pre-owned home sales fell 13 percent in April compared with year ago

02:31 PM CDT on Monday, July 3, 2006

By STEVE BROWN / The Dallas Morning News

Has the North Texas housing market finally turned down?

It's too early to say, but April's 13 percent drop in pre-owned home sales from a year ago should catch folks' attention.

April's decline was the biggest year-over-year slide in local home sales in more than two years, and follows a 4 percent decline in March.

"For two months in a row it's negative," said Jim Gaines, a research economist with Texas A&M University's Real Estate Center. "You are maybe beginning to see a bit of a trend."

Or not. Previous dips in the home sales market have been shrugged off.

But most housing analysts are forecasting a falloff in sales in 2006.

The declines this spring come at a time when home mortgage costs are at their highest point in almost four years.

A close look at housing statistics from the North Texas Real Estate Information System shows that the decline is coming in sales of homes priced below $140,000.

"Those are the entry-level people," Mr. Gaines said. "A 1 percent change in the interest rates can change the number of households that can participate in the market."

The rise in long-term, fixed-rate mortgage costs since last year has added about $90 a month to the payments on an average $150,000 home loan.

"Every time you increase the interest rates you deal out a certain percentage of the buying public," said Larry Kelley with Southwest Mortgage. "It always affects the people at the bottom of the market first because of their income situation."

And with expenses for everything from gasoline to groceries going up, marginal buyers have a harder time coming up with the cash for a down payment, he said.

"The decline in the lower-end sales numbers is consistent with my experience this spring and that of others we talk to," said Bob Edmonson, vice president of Allie Beth Allman & Associates Realtors. "The high-end market continues to roll along, as these buyers have more financing options open to them."

Sales of the highest-priced North Texas homes – those $1 million and up – were 21 percent higher through the first four months of 2006.

Real estate agents also say the market varies significantly by neighborhood, and the statistics back them up.

In April, pre-owned home sales dropped more than 25 percent in moderately priced neighborhoods in areas including Cedar Hill, Lancaster, Mesquite, Oak Cliff, Richardson and Allen. But double-digit sales increases were recorded in more expensive neighborhoods in DeSoto, Northeast Dallas and Far North Dallas.

Overall sales are unchanged from a year ago through the first four months of 2006, according to North Texas Real Estate Information System, which tracks homes sold through real estate agents multiple listing services.

"We are just as flat as a pancake," said Jim Fite, president of Dallas' Century 21 Judge Fite Realtors. "I'm not worried about the declines at this point.

"I don't think we are going to have a knock-'em dead year, but I'm expecting a steady market," Mr. Fite said.

In April, 6,898 pre-owned homes were sold – down from 8,052 in March.

Despite the drop in sales, home prices in North Texas have continued to rise at a modest rate. In April, the median price of homes sold in the area was $149,000 – up 5 percent from a year earlier.

The number of single-family homes for sale in the area was up about 2 percent last month to 44,371 listings. That equals about a seven-month supply of housing on the market.

And that doesn't count all of the more than 9,000 new homes for sale in the area.

A record number of new homes is available in the area, and big builders have been discounting houses and offering incentives to lure buyers from the pre-owned home market.

"There's no question about that," said Ted Wilson with Residential Strategies. "The big builders have the speculative inventory on the ground right now, and discounting is going on."

Mr. Wilson said his surveys show that homebuilders have seen an uptick in customer traffic since March – the same time that pre-owned sales were down.

"I think it will eventually tilt back toward the pre-owned homes," Mr. Wilson said, because new home costs are likely to jump in 2006. "We've seen about a 20 percent increase in home lot development costs that hasn't hit the consumer yet."

E-mail stevebrown@dallasnews.com