Home sales up -- first since '05

In a sign Sonoma County's unsettled housing market may be slowly starting to stabilize, home sales rose in April for the first annual increase in more than two years.

But analysts warned it was much too soon to declare an end to the region's housing slump.

Prices are continuing to fall, with sales concentrated at lower ranges and foreclosure properties driving down values in many neighborhoods. Homeowners in financial distress continue to swamp the resale market, keeping supplies high even as sales rise with the summer home-buying season under way.

Still, buying activity is on the upswing and might signal the beginning of an eventual turnaround.

"People who have held off are coming into the market," said Chris Smith, an agent with CPS in Santa Rosa. "We've got some outrageous deals out there. Some of them are half the price they were two years ago."

Buyers purchased 339 existing homes in April, up 13 percent from a year ago. It was the first year-over-year gain in Sonoma County since September 2005, when the housing downturn began to take hold following an eight-year boom, according to The Press Democrat's monthly home sales report.

More deals are in the pipeline. Sellers accepted offers on 571 homes in April, up 73 percent from a year ago. Those deals should close in May or June.

The surge of sales is more than just a seasonal increase, said Rick Laws, Santa Rosa manager for Coldwell Banker, which prepares the monthly report.

"It's more than agents talking about a lot of buyer activity. It's a strong trend. It is showing a trajectory of increase in business, month over month," he said.

Growing demand notwithstanding, the price for the typical Sonoma County house remained near a five-year low. April's median price of $438,000 was down 22 percent from a year ago. Prices have fallen for 22 consecutive months in year-over-year comparisons, sinking 29 percent from the peak in summer 2005.

Prices have been pulled down, in part, because most purchases are for less than $500,000. About 60 percent of April's sales were in that range, compared with 33 percent a year ago.

Many sellers continue cutting prices because there remains a sizable supply of homes for sale. At the end of April, there was a nearly seven-month inventory based on the current sales pace, and a balanced market is considered to be about four months.

All indicators are lining up with economists' projections that the county's housing market should hit bottom late this year.

"Our expectation was that sales would stabilize first, and there are some signs that this is happening. But prices need to correct further before affordability is such that more buyers jump into the market," said Steve Cochrane, regional economist for Moody's Economy.com.

For prices to level, sales must pick up steadily and cut into the backlog of unsold homes. That includes working through the supply of bank-owned homes, and foreclosures are expected to continue rising for at least six more months.

"More foreclosures are on the way, and distressed sales will put more downward pressure on prices. Maybe we get some price stability toward the end of this year," Cochrane said.

A record number of county homeowners are falling behind on mortgage payments. Lenders are taking back nearly 60 houses a week from county homeowners who have stopped paying their mortgages, and more are coming. Last month, lenders sent 509 default notices to delinquent borrowers, the first step in the foreclosure process.

Falling property values push most of these homeowners over the edge financially. That affects their ability to refinance, and those who can't sell face foreclosure.

Sellers are under particular pressure in neighborhoods with foreclosure and short sales -- when sellers seek less than they owe on mortgages.

More than 40 percent of homes on the market countywide are distressed properties, led by Southwest and Northwest Santa Rosa, Cotati and Rohnert Park, East Petaluma and Windsor, according to a survey by Pete Deatherage of Pacific Appraisals in Rohnert Park.

Banks also have been increasingly aggressive in cutting prices and marketing foreclosure properties to remove them from their books, said Smith, who also sells foreclosed homes for Countrywide Home Loans.

"They're being more realistic with their pricing. They're starting to be more efficient about getting them on the market and in our hands," Smith said. "To some degree, they are defining the market. That's where the business is."

The price declines are drawing first-time buyers who were priced out of the market, homeowners looking to move up in the market and investors.

A foreclosure sale in northwest Santa Rosa was the perfect move-up opportunity for Pierre and Pamela Snediker.

"Anybody can find a good deal. Now would be a good time if you can swing it," Pierre Snediker said.

The couple bought a century-old Craftsman home in good shape for $445,000. The 1,150-square-foot, two-bedroom house sits on three quarters of an acre, considerably more space than the couple had in their Rohnert Park modular home.

After having two short-sale deals fall through, the couple made the offer on the Santa Rosa house a day after it went on the market.

"I wanted to act quickly. It was too good of a deal to let sit," Pierre Snediker said. "They had quite a bit of interest on the property after we had made our offer."

Lenders and title company officials also have noticed the upsurge in activity.

"People are getting more interested in seeing what they can do. It's almost like they're getting ready. They're sticking their toe in the water to see how much they can afford," said Scott Dovala, branch manager for Ascent Home Loans in Santa Rosa.

Some buyers remain wary of purchasing with home values continuing to fall.

Others may face difficulty due to tighter lending guidelines. Buyers today need a 10 percent to 15 percent down payment and must have very good credit to qualify for the lowest interest rates. First-time buyers with low and middle incomes can take out FHA-backed loans with down payments of 3 percent or less.

"This is not a complete turnaround," Laws said. "We're not there yet, but we're on the road there."

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.

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Is the housing market beginning

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