Real estate market perplexes experts, confounds buyers

McALLEN -- The Rio Grande Valley real estate market is fickle, strong, slumping, contradictory and entirely confounding for professionals who seem to agree on only one thing: They would rather be here than anywhere else.

If the news is bad one week, it's often good the next. When home sales fall in one price range, they're stable in another.

When the confidence of real estate professionals, who estimate prices and market value, is shaken, prices can fluctuate wildly as uncertainty becomes pervasive.

The Valley's real estate market has only been scratched by the economic downswing, but it is not immune to the associated uncertainty, said Deborah Martin, owner of Edinburg-based Realty World Valley Properties.

"Everything is fluctuating back and forth," Martin said. "It's really kind of hard to gauge. You can't (gauge) from one month to the next."

After reaching a record high in August, the average price of a new, single-family home in Hidalgo County fell about $4,000, to $151,900, in September. Across-the-board home prices, which include used homes, continued rising after a months-long slump to $140,500, up from $132,300 in August, according to the Real Estate Center at Texas A&M University.

For Martin, it's a sign that prices are finally starting to stabilize.

"The prices are pretty much steady," she said. "I don't think they're falling that much anymore."

Helping to settle the market are indications the Valley is shedding a surplus of homes. Local developers, like their peers across the country, built too many homes during the boom years.

The way houses are selling right now, it would take almost 15 months to sell off all the existing for-sale homes in the county, according to the Real Estate Center.

Still, that's down by about three weeks from the July peak, according to the Real Estate Center. The excess of new vacant homes has also fallen, bringing the supply closer to demand and signaling the market is already making necessary price corrections, according to a study by Metrostudy, a firm that tracks housing starts and new home sales nationwide.

Even so, Metrostudy didn't exactly offer a glowing outlook for the Valley.

"What started as an oversupply to an otherwise healthy market has evolved into a massive erosion of consumer confidence," the company's president, Mike Inselmann, said in a news release. "The Rio Grande Valley market remains challenging."

The study also found that the resale of homes in September was 8 percent below the resale rate in the same month in 2007. New-home starts in the third quarter of this year also fell by 52 percent from the same period last year in the McAllen area, according to Metrostudy.

On the good-news front, though, is the availability of loans to Valley buyers with good credit histories. However, loans remain difficult to get for those with lackluster credit histories as lenders more carefully scrutinize assets, debts and other indicators of creditworthiness, said Bobby Dannemiller, a local loan officer with Supreme Lender.

"The national media is kind of blowing this out of proportion," Dannemiller said. "The biggest problem (is) that (interest) rates are bouncing up and down."

Consequently, low-income borrowers are finding it harder to get loans, decreasing demand for lower-income housing and precipitating a price drop. Furthermore, officials said, the prices of those homes had been inflated.

Most of the homes being constructed are priced from $100,000 to $150,000, and most of the sales of existing homes on the market are within that price range, according to the Real Estate Center.

Further compounding the problems for the housing market is the persistence of foreclosure filings. In September, the U.S. Department of Housing and Urban Development released statistics showing that 8 percent of property owners with loans in Hidalgo County entered foreclosure proceedings in the prior 18 months.

Yet even that statistic has been tempered by news that foreclosure filings in October fell to close to 400 after exceeding 700 in September.

The uncertainty in the market and the low prices, however, led many real estate professionals to conclude that it's a buyers' market. There are great deals to be had if you already have the money, considering financing could be hard to come by.

"It's incredibly slow," said Connie Fielder-Norton, owner of Fielder-Gardner Realtors in McAllen. "(Investors) are making offers that would be embarrassing in another market, and I'm having sellers accept them."

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Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434.