Gabe Khouli, Herald Bulletin
gabe.khouli@heraldbulletin.com
Although the housing market has been declining significantly, for the first time since 1991, analysts are pointing to national and local economic indicators that say the market is slowly recovering.
Madison County and Anderson in particular have had increased home sales over the past two months, while most of the rest of Central Indiana has experienced a decline, said Jim Litten, president of residential real estate services for F.C. Tucker Company.
"Anderson has some new industry coming in, new job growth," Litten said. "Whenever a city gets job growth, there will be home sales increases. Jobs drive real estate."
Mayor Kevin Smith said the city government has been working hard to bring in businesses by cleaning up and beautifying land and by decreasing the city's property tax rate the past two years. He said Anderson has benefited from increased positive national attention from sources like Forbes magazine. Forbes named Anderson the 98th best small metropolitan area in the U.S. for business and careers, giving it high marks for a low cost of doing business, according to forbes.com.
"Anderson really is becoming one of the more attractive locations for new investment," he said. "In stark contrast, five years ago or even less, Anderson was the poster child for post-GM cities. We hope city government policy has been the a good catalyst and foundation for the benefits we're now beginning to reap."
The battle is still ongoing, though, and Litten said that the real estate market in Indiana has not yet recovered because consumer confidence is low, a thought echoed on the national scale by Lawrence Yun, National Association of Realtors senior economist, on NAR's Web site.
"There has been so much nationally written about the decline of the real estate market," Litten said. "A lot of markets were over inflated and started slowing down in the spring of 2006. Every day the headline talked about the declining real estate market, and it carried over into consumer confidence."
Litten said the three main indicators of the real estate market are interest rates, job stability and consumer confidence.
On NAR's Web site, Yun said the market was underperforming when considering the positive economic factors: job creation, economic growth, favorable interest rates and flat home prices. Yun said that in addition to low consumer confidence, the higher requirements being placed on subprime loans was also dragging the market.
Subprime loans are riskier loans. They have higher-than-average interest rates designed for borrowers with bad credit.
Subprime loans have been a big culprit in the housing market crash, leading to foreclosure, bankruptcies and empty houses, according to previously published Herald Bulletin articles.
Litten said that most lenders have increased restrictions on subprime loans, requiring higher credit scores and down payments.
"If you look at 2005, we had some really unusual financing options out there that people got into," he said. "Those are the ones that are imploding right now. Subprime lending is pretty close to being gone."
As the economy continues to improve and more businesses are brought into Anderson, the market will begin to return to previous levels. In the meantime, NAR President Pat V. Combs said on the NAR Web site that this is a definitely a buyer's market, with the negotiating power given to buyers because of all the homes available.
However, looking at a small sample size like a two-month period of time and extrapolating out to a general trend is dangerous because of the amount of fluctuation that can happen at any time. Madison County, along with the rest of Indiana and the United States, is still below home sales figures from the first half of 2006, according to NAR's Web site. Litten said the summer months are the typical peak of the home sale season, so strong growth from July through October could signal the returning stability many home buyers are searching for.