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The Sussex County housing market took a sharp hit this fall as a perfect storm of problems developed both here and nationwide: an oversupply of homes, a credit crisis and a decrease in consumer confidence.
Still, a local builder says the gloomy outlook will pass - and possibly sooner rather than later.
During a national and regional housing update Nov. 13, at the clubhouse of Independence, Schell Bros. President Chris Schell said Sussex home sales are slow, but there is plenty to be optimistic about in the near future.
Addressing more than 50 local Realtors who gathered at the Schell Bros. development, Schell said statistics point to a cyclical bottoming out of the housing market, predicted to reach its lowest point within in the next three months. Unlike some areas of the country, Sussex County seems likely to bounce back quickly, he said.
“My major message is that consumer sentiment right now is very low, and that typically marks the bottom of the market … when things begin to change,” said Schell.
He said sales are ugly right now, but that people should realize when it gets this bad, it’s good.
Schell said his company and other national builders in Delaware reached their peak home sales in 2004 and 2005. A classic speculative bubble formed, he said, resulting in a huge surplus of new and existing homes despite a high demand in the area.
“Back then, a lot of people got involved in real estate and everyone was making money,” said Schell. But the problems implanted in the speculative boom came to an end, led by a mortgage crisis, and ultimately resulted in a huge drop in consumer confidence, he said.
Decreased sales have led many national building companies to move out of Sussex County, so the number of houses on the market is again beginning to stabilize, Schell said. Although home values on average might still be dropping, a closer look at the statistics paints a more positive picture, he said.
First, inflation-adjusted data shows that home values are still higher than they were in the early 2000s, a time when the housing market was healthy and bustling, Schell said. While the data shows that a large drop has occurred in home values since 2005, that number is skewed as a result of foreclosure sales and the inventory of median-priced homes not yet sold.
Even more telling, said Schell, people are devoting a smaller amount of their total income to pay off monthly mortgages than they have for decades. Nestled at about 29 percent of household income, the number has not been that low since the mid-1970s, he said.
Nationwide, the housing market is less certain to rebound quickly, but Schell said increased activity in Sussex County is a good bet. The coastal areas and some inland venues have historically been attractive to retirees from New Jersey, Pennsylvania, Maryland and New York, said Schell. Right now, Sussex County accounts for half of the new homes built in Delaware, he said.
“I’m very optimistic about the future of housing in Sussex, particularly as it pertains to retirees moving here,” said Schell. “Once people start moving from neighboring states - and they will – that will be the trigger for a new level of growth.”
Looking at past results, Schell said a comeback for the housing market could occur at a much faster rate than many people have predicted. Recoveries normally occur not in a “bathtub” shape on a graph with gradual strides over time, said Schell, but more quickly.
For more information on Schell Bros. visit www.schellbrothers.com. Communities built by the company include Independence, the Vineyards at Nassau Valley, Breakwater, Heritage Creek, the Woodlands of Pepper’s Creek and Windswept at the Peninsula.
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