Home sales at 3-year high in county

<p>Bargain hunters pushed Sonoma County home sales to a three-year high for November, but a large supply of distressed properties reflects the region's still-unsettled housing market, according to a new report.</p><p>Home sales rose 46 percent from a year ago, the eighth consecutive such increase as buyers once priced out of Sonoma County and investors snap up the region's lower-priced properties, according to The Press Democrat home sales report.</p><p>Distressed homes command the market. Seven out of 10 homes sold in November were foreclosure properties unloaded by banks or short sales by homeowners getting out of mortgages they no longer could afford.</p><p>The concentration of sales at lower prices dropped the county's median home price to $324,950 -- a 35 percent decline from a year ago. Prices were last this low in 2001.</p><p>Steadily falling prices and improving loan interest rates have stoked sales enough to take a bite out of the county's abundance of homes for sale.</p><p>However, there remained a more than five-month supply at the current pace of sales, and four months is considered more balanced. Foreclosure and short-sale properties continue to pile onto the market, leaving buyers largely in control.</p><p>"Sales aren't keeping up with new listings. This is why prices are declining," said CJ Holmes, a Santa Rosa real estate broker. "We have not reached stabilization in the market. We've got a ways to go."</p><p>Volatility continues</p><p>Sonoma County housing remains volatile, with the region and much of the Bay Area ranking high in a national study of housing market stress released Monday. The study measures foreclosure activity, home price changes and other risk factors.</p><p>"Housing market risk has been increasing in fairly dramatic fashion. You have a more difficult time selling homes in riskier areas," said Mike Ella, president of Home-Smart Reports, a real estate research company in San Juan Capistrano. "But my belief is that these areas have felt most of the pain."</p><p>But several recent economic forecasts call for home prices to hit bottom in Sonoma County sometime in the second half of next year.</p><p>The recent stretch of stronger sales is a step toward stability as more buyers sense now is a good time to purchase. Buyers had been wary of plunging prices or pushed out by tighter guidelines from lenders.</p><p>Sonoma County home sales have returned to historic averages four of the past five months. November's 358 purchases compares with an average of 348 for the month in the 19 years The Press Democrat has tracked county home sales.</p><p>Homes affordable</p><p>More residents can afford homes in the county. Prices have fallen to levels where someone earning the county's median income of $77,800 can qualify for a mortgage to buy homes in the $300,000 range.</p><p>"It's always been about affordability. If I can afford it, then I'm going to go out and buy it," Ella said.</p><p>Sales picked up as banks and homeowners slashed prices to stand out in a crowded market.</p><p>About 70 percent of all homes sold in November were priced under $400,000, and a similar percentage were foreclosure and short sales, according to Bay Area Real Estate Information Services, the county's multiple listing service.</p><p>Homeowners are defaulting on mortgages at a rate of 97 a week, and banks are taking back 61 homes a week, both well above last year's levels, according to county records. While the pace has slowed in recent weeks, those properties often end up for sale, adding to what remains an oversupply of homes on the market.</p><p>"There's still a good number of properties coming on. We need to work through that. It's a big number, and I call it a fire sale," said Rick Laws, Santa Rosa manager for Coldwell Banker, which prepares the Press Democrat sales report.</p><p>New listings continue to exceed sales on a monthly basis, though the gap is narrowing. In November, 410 houses came on the market compared with the 358 sales that closed, according to the multiple listing service.</p><p>Buyers shop around and even pull out of purchases if they find a better deal.</p><p>"It's tough to keep buyers in escrow," Holmes said. "They find new properties that are much better priced than the deals they are in, so they make new offers. It's amazing."</p><p>Still, sales are slowly catching up with supply.</p><p>The inventory of unsold homes declined for the seventh straight month in November.</p><p>Falling loan interest rates could boost home sales because they lower monthly mortgage payments.</p><p>Borrowing costs fall</p><p>Lenders have been lowering home financing costs in response to federal efforts to cut interest rates and other measures to shore up housing markets and the nation's economy.</p><p>The average rate on a 30-year loan has fallen nearly 1 percentage point in the past six weeks, reaching four-year lows. The average was 5.53 percent on Tuesday, according to Bankrate.com.</p><p>Buyers would save about $175 a month on their mortgage payment compared with six weeks ago on a $324,950 home purchased with a 30-year fixed-rate mortgage and 10 percent down payment.</p><p>"I think that what we're seeing is going to drive a very high level of activity heading into 2009," Laws said.</p><p>You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.</p>