The market in Ventura County is showing signs of waking up again. In the last 3 weeks I have had numerous clients begin to search for homes. This is a very different feel from a month or two ago. I'm not sure I can put my finger on any one thing, but I think some of the change is coming from more strong buyers, and also from a developing change in the way banks are doing business. Buyers are adjusting to the changing mortgage market and see the foreclosures and short sales as a wonderful opportunity for themselves. Prices and interest rates are still falling. Banks are carrying an ever expanding inventory of homes they need to get rid of.
Little help is coming from the new government programs aimed at helping out unfortunate home owners who are behind in their payments. These programs are helping only a very small group of people. The Bush Plan is expected to bail out many less borrowers than the 240,000 subprime loans claimed - very ineffective. Meanwhile, in Stockton California - roughly one out of three homes is in foreclosure. However, this is an extreme example. In most towns, REOs are still a small percentage of the total real estate market.
Are any Federal Programs working? Maybe the new mortgage limits for FHA insured loans will help a bit at 417K, but there are not going to be a great many folks affected in this market. We need something more like a 650K loan limit to really jump start this county's market again. Still, the market offers many underpriced homes for people who are ready to buy right now.
A few days ago in Ventura County, there were 4970 active listings, only 351 of which were REOs. (Bank owned sales). Of 468 properties in a pending status, only 72 were REOs. That means less than 10% of our market is being offered by the banks. Are there a lot of REO's? Yes! Are they driving the market? It depends.
In neighborhoods with many foreclosed homes and short sales, the normal market has been gutted. Some of the newer Oxnard neighborhoods have seen 25% to 30% reductions in home prices over the last year. Some homes listed close to 800K a year ago are now below 600K. However, in neighborhoods where there are few foreclosures, the market prices are much less affected and tend to indicate about a 10% reduction over last years prices. Both of these conditions can exist in locations within miles of each other. That is one of the wonders of this market. Most neighborhoods fall somewhere in between.
I spoke yesterday with another Realtor in Thousand Oaks who had offered a 1462 sq ft home several months ago at 650K. It is a short sale (they owe more than the asking price). Within two months they dropped the home to 450K. The realtor told me they had to repost the price at 617K to slow down all the many offers that they received and had to forward to the foreclosing banks Asset Manager!
What I am intrigued by - is how the mortgage bankers are coping with the deluge of short sales and foreclosures. Even though the percentage of foreclosures is small, the bank asset managers are literally drowning in foreclosed properties. Nationwide, it is predicted there will be 2 million subprime foreclosures by 2009. In September of 2007 there were 72,571 California NOD's (notice of Default) filed. Ventura County NOD's are up 138% in 2007 with 1,377 filed as of October.
What does all this really mean?
I think we are beginning to see banks more willing to consider low offers for homes they own or are about to own. They must move these homes more expeditiously or face even more extended business losses. The trick for realtors will be to identify those banks which are most buyer friendly. Those banks which can adjust to the new times and are willing to do what it takes, will accept lower offers from the lucky home buyers that are fully capable of meeting the new lending requirements.
I have clients now in a transaction for a townhome which is in a neighborhood market of around 550K. The listed price for one of these homes is now less than 400K on a short sale. The bank is considering our offer, even though that is a huge drop from the mortgage owed on that home. Six months ago no bank would have looked at such an offer.
The willingness of some banks to consider offers for less than the mortgage owed (on REO and Short Sale properties) is the biggest change I see in our market today.
I believe that there is a developing realization among banks, of the hole they have dug for themselves. Their outmoded REO policies are preventing them from quickly selling these homes and it is hurting the banks financially. We may be seeing the beginnings of a new banking paradign and willingness to accept a bit of a loss up front, rather than a protracted draining of bank coffers as these homes sit and sit and sit on the market. Bank auctions are also becoming more frequent as another indication of willingness to settle at a loss.
It will be fascinating to see how this new trend develops over the next few months as we enter the traditional home buying season.
Mark Thorngren
Movewest Realty, Inc.
http://www.markthorngren.com/
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