Home sales soar, prices fall

Home sales doubled in September as bargain hunters grabbed up Sonoma County homes, putting a dent for the first time in the region’s lower-priced properties, according to a new report.

Two out of three homes sold in September were foreclosure properties unloaded by banks or short-sales by homeowners bailing out on mortgages they could no longer afford.

The wave of discounted properties hitting the market lifted home sales to their highest level since March 2006. Buyers purchased 436 existing single-family homes in September, twice the number from a year ago, according to The Press Democrat monthly real estate report.

But the same dynamic driving sales upward is also pushing prices down.

The concentration of sales at lower prices dropped the county’s median home price to $359,000 — a 35.3 percent decline from a year ago.

Still, there are signs the sales surge is starting to cut into the backlog of foreclosure homes. The number of homes for sale under $400,000 fell for the first time since distressed properties began flooding the region’s housing market last year.

“People want to get into this lower-priced market. A lot of people are thinking maybe this supply of really low-priced great deals are going to dry up,” said Beth Robertson, a broker-agent for Century 21 Classic Properties in Rohnert Park.

The least expensive homes are drawing the most interest from buyers.

Sales of homes under $400,000 made up 63 percent of all transactions in the county last month, while purchases above $500,000 accounted for only 20 percent.

In another indication the upper tier continues to languish, fewer sellers are willing to put high-end homes on the market. The number of homes for sale above a half-million dollars has dropped 50 percent over the last two years — a period in which the number of homes under a half-million dollars has jumped 94 percent.

The high end of the market has cooled, in part, because of changes in the credit market. Lenders have hiked borrowing costs due to lingering uncertainty about the housing market, particularly on jumbo loans needed to purchase homes above $500,000, analysts said. As a result, fewer buyers are looking for homes at the upper end.

“It was a credit crunch and now it’s become a credit freeze. Those buyers are being cut off,” said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.

Still, enough buyers continued to find deals at lower prices in the region to make September an unusually busy month, compared to historical averages. It was the sixth consecutive month that sales increased on a year-over year basis.

Sonoma County’s housing market has been in transition this year as banks began slashing prices to sell a mounting number of foreclosed homes in the wake of the housing bubble’s collapse.

Lenders have taken back about 62 homes each week this year from Sonoma County homeowners who defaulted on their loans. A year ago, the rate was about 13 a week.

“The banks had to sell them because it was a fire sale,” said Rick Laws, Santa Rosa manager for Coldwell Banker, which prepares The Press Democrat sales report.

Sales of distressed properties accounted for 67 percent of all sales in September, up from 54 percent in August and more than three times the level in January, according to Bay Area Real Estate Information Services, the region’s multiple listing service.

Plummeting prices are drawing in first-time buyers who now can afford homes that soared out of reach during the housing boom in the first half of this decade. A growing number of investors are also getting into the market — accounting for about 30 percent of sales — and purchasing homes to rent out.

Mortgage interest rates are helping to bring buyers back into the market. Although rates have risen nearly a half-point over the past week, reaching 6.28 percent on a 30-year loan Wednesday, rates remain near long-term lows.

“Interest rates are good. It’s affordable,” Robertson said.

The flurry of sales is resulting in bidding battles for foreclosure properties. Recently, one of Robertson’s first-time buyers was outbid for a bank-owned Windsor home listed for $385,000 – $190,000 under what the former owner paid three years ago.

“Ever since that happened we’ve moved very quickly on every new listing,” Robertson said.

Another client, an investor, was successful after paying $355,000 for a bank-owned home listed for $315,000 in northwest Santa Rosa. The previous owner paid $499,000 nearly two years ago.

Such discounting has accelerated the rate of decline for Sonoma County’s median – the price at which half the homes sell for more and half for less.

September’s median of $359,000 is down 42 percent from the peak of $619,000 three years ago. Prices have now fallen 27 consecutive months in year-over-year comparisons.

“If that’s not a pretty serious correction, I don’t know what is. But that’s the way things should go: clear out the foreclosures and then things should stabilize,” said Karl Bundesen, owner of Century 21 Bundesen Realty in Petaluma.

But the nation’s ongoing economic turbulence makes it difficult to predict whether sales will remain strong. Some potential buyers are wary prices will continue sinking in response to wild swings in financial markets and the weakening economy, Bundesen said.

“It’s tied to consumer confidence. That’s more important than anything,” he said.