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Housing market buffeted by lack of sellers, rising interest rates

Ken Worley, Realtor with Berkshire Hathaway HomeServices, stands in a house for sale. - (Photo / HARRISON JONES)

York County Realtor Ken Worley felt like he was listening to a broken record this year as reports on York County home sales told largely the same story month after month.

The story has been that homebuyers are paying more each month to buy a dwindling supply of homes. When a home hits the market, multiple buyers often are pouncing to buy it, which has sped up the pace of sales. The average York County home is selling in about three weeks.

In July, the pace quickened. York County set a record at 19 days on the market for the average home sold. By August, the year-to-date median-sale price in the county hit $175,000, eclipsing the record high set in 2007 when the York County housing market saw a median-sale price of $174,900.

“I would anticipate it will get better, but I don’t have a crystal ball,” Worley, the current president of the Realtors Association of York and Adams Counties, said in early September. “The fact is the inventory is low and there are still buyers out there looking.”

The lingering problem in York County and the rest of Central Pennsylvania is that not enough homeowners want to let go of their homes, fearing they may not find another home fast enough.

“I see no signs that there will be any dramatic change over the next six to 12 months,” said Doug Foltz, president of the Lancaster County Association of Realtors. “I think all signs point to continued growth.”

Meanwhile, new construction – which is largely left out of the association data because builders typically avoid listing their homes on a multiple-listing service – has been picking up and could help meet some of the demand.

Some larger mixed-use developments are under way, including Arcona and Legacy Park in fast-growing Cumberland County.

Lancaster-based Charter Homes & Neighborhoods recently announced an $80 million investment in the next stages of Arcona, which is off Lisburn and Rossmoyne roads in Lower Allen Township. By the time Arcona is complete, which could take up to 20 years, Charter expects the development to have more than 1,000 homes.

In May, Lancaster County-based Landmark Homes kicked off construction in Legacy Park, which is on the edge of Mechanicsburg on South Market Street (Route 114), not far from Route 15 and the Pennsylvania Turnpike. Landmark plans to build 683 housing units there.

But both projects took years to get to the point of major construction.

Indeed, builders have long said that permitting takes too much time, there are too many layers of federal, state and local regulations, and it’s gotten more expensive.

“Conditions for builders have not improved,” said Dan Durden, CEO of the Pennsylvania Builders Association.

Among the hurdles are rules for curtailing stormwater runoff under federal mandates to clean up the Chesapeake Bay watershed.

Land prices aren’t falling either. And many builders remain unwilling to risk developing land on their own after the last financial crisis. Instead, smaller builders buy lots from developers as they need them.

“For things to loosen up, we have to look at affordability from a builder perspective,” said Edwin Tichenor, president of the Greater Harrisburg Association of Realtors. “The cost of construction continues to go up.”

Material prices could go even higher because of heavy property damage caused by recent hurricanes along the East Coast.

“You often see distributors follow the money,” Durden said. “If they can ship massive amounts of product to affected areas at X plus five, there is no sense in selling in Pennsylvania at X.”

But interest rates on mortgages also have been creeping up, which may prompt some buyers to delay their search for a home or look at lower-priced homes.

That could loosen up available inventory in some higher price ranges for other buyers and may slow down overall price increases, Realtors say.

“The possibility of it turning into a buyer’s market again will depend on so many factors,” Worley said. “Even if it (the mortgage rate) goes up to 5.25 percent, that is still a wonderful rate.”

Interest rates were hovering around 4.6 percent in mid-September.

“If prices don’t flatten out, you’re bound to see it get scarier,” Durden said. “It’s not a bubble, but the gap now between the ability to buy and what you can rent a nice place for, it’s pretty competitive.”

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