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Distressed homes account for half of August sales
Published: Wednesday, September 17, 2008 at 4:33 a.m.
Last Modified: Wednesday, September 17, 2008 at 2:13 p.m.
The collapse of the housing bubble, which fueled Wall Street's latest meltdown this week, continues to reverberate through Sonoma County, according to a report issued Tuesday.
Just over half of the homes sold in August were dumped by desperate owners trying to avoid foreclosure or by banks that seized them from borrowers who fell behind on their mortgages.
The wave of transactions involving discounted properties drove the median price to its lowest level in six years. The median fell to $382,500, a decline of 30.5 percent from a year ago, according to The Press Democrat monthly real estate report.
Sales continued to surge, however, rising above last year's levels for the fifth consecutive month. Buyers purchased 404 single-family resale homes in August, up 23.5 percent from a year ago.
Slowly but surely, bargain hunters are starting to make a dent in the backlog of distressed homes on the market -- a necessary step before prices can stabilize.
The inventory of unsold homes declined for the fourth straight month. Still, there were 2,306 homes for sale at the end of August, nearly a six-month supply at the current pace of sales. A four-month supply is widely viewed as a sign of a balanced market where buyers and sellers are on equal footing.
While the upper tiers of the market languish, homes priced around $300,000 are moving quickly, often drawing multiple offers.
"This foreclosure stuff is going fast if it's priced right. That's what's fueling the lower end of the market," said Marty McCormick, owner of McCormick and Co., a Santa Rosa mortgage broker and real estate sales office.
Falling interest rates, following the federal government's bailout of mortgage giants Fannie Mae and Freddie Mac, could provide a further boost. The rate on a 30-year fixed-rate loan fell to 5.72 percent on Tuesday, down from 6.35 percent two weeks ago before the Fannie and Freddie rescue plan.
Falling interest rates lower monthly mortgage payments for home buyers. Buyers would save about $124 a month on their mortgage payment, compared with two weeks ago, on a $382,500 home purchased with a 30-year fixed-rate mortgage and 20 percent down payment.
"Interest rates coupled with these prices have a lot of Realtors' phones ringing," said Rick Laws, Santa Rosa manager for Coldwell Banker, which produces The Press Democrat home sales report.
The government bailouts and turmoil on Wall Street is something of a double-edged sword for the housing market. While it has resulted in cheaper mortgages, it could also further weaken the economy.
"If people start getting nervous about their jobs, that can hurt sales," McCormick said.
The county's housing market is continuing to work through the wreckage wrought by risky mortgages, which allowed many people to buy homes they ultimately could not afford.
The market peaked three years ago when the median hit a record $619,000 -- the point at which half the homes sold for more, and half for less.
But buyers dropped out as prices spiraled upward, fueled by loose lending standards. Sales slowed and then began to slide as banks tightened requirements to get a mortgage. The decline accelerated last year as foreclosures soared, flooding Sonoma County's for-sale listings.
Sonoma County home prices have now fallen for 26 consecutive months in year-over-year comparisons, returning the median price to levels not seen since 2002.
Today, Sonoma County's housing market is largely defined by sales of bank-owned homes and short sales, where homeowners sell for less than they owe on a home in an attempt to avoid foreclosure. In August, 53 percent of single-family home sales were distressed properties, up from 17 percent in January.
On Friday, lender GMAC accepted a $303,000 offer from Matt Larson and his wife, Rhoda Lynch, for a northwest Santa Rosa home that sold for $517,000 in January 2006. The couple began looking two months ago when prices came within their reach.
"A year ago, it was something that we wanted to do, but we were thinking we would have to move out of state. Then the market kept falling," Larson said.
While the couple found plenty to choose from, they were frustrated by the stiff competition. They were shut out on offers for eight other homes. On the last one, they offered $303,000 for a bank-owned home listed for $279,900 and the lender instead took a $290,000 cash offer from an investor.
"I expected three or four other offers, but when you get up into the double digits, that was sobering. The desirable properties, people were jumping all over them," Larson said.
Homes priced around $300,000 draw the most interest these days. While investors are wading into the market, three out of four buyers are purchasing their first home and plan to live there, agents said.
"Finally it's gotten back to the point where local people can buy homes and stay here," said Jan Quilici, owner of Realty World-Benchmark Realty in Windsor.
Sales of distressed properties jumped this spring and summer as banks and then homeowners began slashing prices to make homes stand out in an increasingly crowded market.
"Six months ago you could drive down any street and see three or four signs of bank-owned properties. You don't see as many because properties are moving and it's not the stalemate we were in," Quilici said.
While homes priced under $400,000 are moving quickly, lending remains tight at the higher end of the market, where borrowers pay a premium for so-called jumbo loans. Sales of homes priced above $500,000 have fallen nearly 50 percent over the past year, and the number of homes for sale in that range has dropped more than 30 percent over the same time period.
"What's there is sitting there," Laws said.
You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.
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