Bargains Spur Feeding Frenzy at Low End of Home Market

Ventura County Star Article from February 20,2009

But housing prices still sliding, experts warn
By Jenni Mintz (Contact) Friday, February 20, 2009

Grim economic news isn’t stopping some homebuyers from pouncing on distressed properties, even as experts warn that prices could fall further.

Spurred by foreclosure sales, Ventura County’s home sales shot above year-ago levels for the seventh straight month in January, MDA DataQuick reported Thursday. There were 578 new and existing homes and condominiums sold last month, up 36.6 percent from 423 the previous year, but down 34 percent from 876 in December, according to the real estate information service.

The median, the point where half the homes sold for more and half for less, was $335,000 in January, falling 29.9 percent from $477,750 for the same month in 2008. The median has fallen for 30 consecutive months, plunging 46.8 percent from its $630,000 peak in December 2005.

The steep decline was attributed to sliding prices and types of homes that were sold.

Foreclosures comprised 49.1 percent of last month’s resale activity. Upper end of market listless “The bottom end is selling like hotcakes,” said Brian Troop, president of Simi Valley-based Troop Real Estate. “There’s not a lot of activity in the upper end of the market.”

Lower-end properties are hot sellers for several reasons, Troop said. Many buyers are investors wanting to buy at the bottom of the market, but there aren’t a lot of homeowners who are looking to move up, he said. If they did, the availability of mortgage loans might be an obstacle.

Lenders have been tight with upper-end mortgages, but Troop thinks that will change with the passage of the economic stimulus package, which increased loans backed by Fannie Mae and Freddie Mac to $729,000 through the end of the year. Record low prices and interest rates and the recently enacted $8,000 tax credit available to first-time homebuyers are other perks, he said.

The average rate on a 30-year fixed mortgage dropped to 5.04 percent this week from 5.16 percent last week, Freddie Mac said Thursday. A year ago, a 30-year fixed-rate mortgage averaged 6.04 percent.

“The opportunity for buyers is the best I’ve seen, and I’ve been in the business since 1978,” Troop said. He said the average sales price has flattened out in the lower market, where he’s seeing five to 10 offers on a home and properties selling for more than the listed price.

But many people are still skittish.

“Nobody I know is buying now — everybody is afraid of losing their job,” said Dave Lake, an IT analyst for a healthcare company in Westlake Village. Awaiting ‘break-even point’ Lake said he’s renting until the market corrects to a sustainable level. He expects prices to fall 20 to 30 percent in Westlake Village in the next year, and then drop an additional 5 to 10 percent for several years after that.

“I’m waiting for the break-even point, where the cost of owning approaches the cost of renting,” he said, adding that he expects that to happen in the next 18 months in Westlake Village.

For many first-time homebuyers and investors, it’s not worth trying to time the price bottom perfectly, said John Walsh, DataQuick president. “They’re happy to lock in substantial discounts relative to the peak.”

That was reflected in a sales spurt across Southern California, where a total of 15,227 new and existing homes and condominiums closed escrow last month, up 52.5 percent from 9,984 a year ago.

The Southland median was $250,000, down a record 39.8 percent from $415,000 in January 2008, and the lowest since it was $242,000 in February 2002, DataQuick reported.
Foreclosures represented 60 percent of all homes resold. Sales of newly built homes were the lowest for the month of January in at least 21 years, DataQuick reported.

Default notices and foreclosures have slowed, but many economists agree that it could take years for the housing market to recover and prices to rebound.

Dennis Torres, executive director of real estate operations and adjunct professor at Pepperdine University’s Graziadio School of Business and Management, expects prices to continue to fall at least through 2009.

“In Ventura County, I see them going down more than they are now, but I do not see the rate of decrease anywhere near what it was,” Torres said.

On the Net:
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