MEDIAN PRICE IN VALLEY DIVES 19.7% FROM LAST YEAR
By Sue McAllister
Mercury News
Article Launched: 08/20/2008 01:30:34 AM PDT
Bargain-hunting home buyers scooping up foreclosure properties deserve credit for some rare good news about the battered Bay Area housing market: Home sales in the region were better last month than they were a year ago, the first time that's happened since 2005.
But in Santa Clara County, where the foreclosure problem is less severe, home sales were down 13 percent compared with July 2007, according to a report Tuesday from MDA DataQuick. That decline was less pronounced than in recent months.
Median prices, meanwhile, took a dive throughout the nine-county Bay Area, partly as a result of surging sales of low-priced homes. Of the previously owned homes sold in the nine-county region in July, one-third had been foreclosed upon in the past year.
"The good news about this is we're able to put first-time home buyers into all these REOs," said Joe Brown, president of realty brokerage Coldwell Banker Silicon Valley. "REO" means the property is "real estate owned" by a bank that has foreclosed upon it.
Around the Bay Area, the median price of the previously owned houses that changed hands in July tumbled 34 percent from a year earlier, to $485,000. In Santa Clara County, the median price slid to $646,500, 19.7 percent less than the July 2007 figure of $805,500. Condo prices in the county declined 16.5 percent to $430,000.
Certainly, one reason for the sharp price drops is that many homes have lost value. But a drastic change in "market mix" has exacerbated the plunge.
"All the cheap stuff out there is getting scooped up by people," said John Karevoll of DataQuick. Generally speaking, "the expensive stuff is on hold."
In July 2007, the opposite was true. Easy financing for no-money-down buyers had already dried up, so most sales that occurred were of more expensive homes, which drove the median price up. So the gap between median prices in summer 2007 and today is that much wider.
Software architect Yang Tang, a Santa Clara County resident who is relocating to San Francisco for a new job, just bought a one-bedroom condo in the Mission District after four months of looking with his agent, Hsin Feng of Coldwell Banker in Cupertino.
'Waiting game'
He's paying about $450,000 for the 700-square-foot home, which was previously foreclosed upon. As recently as April, "I think the same kind of places would have been right around $600,000 for one-bedroom, one-bath loft condos," he said. "It was a waiting game for those to come down to my price range."
Homeowners may wince at the recent slump in median prices, but the regional increase in sales - led by Contra Costa and Solano counties - should lift their spirits a bit. A total of 7,586 new and resale houses and condos changed hands in the Bay Area last month, up about 6 percent from June, and up 2.2 percent from 7,178 sales in July 2007. As buyers help reduce the supply of homes for sale, prices can begin to stabilize.
In parts of Santa Clara County hardest hit by foreclosures, sales have accelerated this summer as prices have fallen.
In September, for example, sales were so slow and for-sale homes so plentiful that it would have taken more than two years to sell all the houses on the market in Central, South and East San Jose. Now, given the sales pace and inventory over the past several weeks, it would take less than five months.
In Gilroy and Morgan Hill, there was a year's worth of houses for sale in mid-March, but today the supply is down to five months as well.
'Improved market'
"It's a dramatically improved market in those areas," said Richard Calhoun, who tracks the inventory trends using data from the multiple listing service.
Intero agent Paul B. Newman said multiple listing data shows that in South San Jose, for example, only 18 houses closed escrow in April, but the number rose to 47 closed sales in July.
"Values have dropped to a point where investors are coming in and buying those properties because they can get positive cash flow now," Newman said. That means the monthly rent for the properties is more than the investor-owner will spend on mortgage and tax expenses.
Coldwell Banker's Brown said it's hard to forecast fall's real estate market.
"Traditionally, we have a little bump after Labor Day, but we've had a bump in summertime, and we have these REOs coming online every day," he said. Brown said the "eternal optimist" in him wants to believe the surge in sales will continue through autumn.
Then again, he said, "there are so many moving parts, the dollar, the price of oil. We do not have the liquidity issue solved" - meaning mortgages are not always easy to obtain - "and yet we're having these sales. That points to some pent-up demand."
Contact Sue McAllister at smcallister@mercurynews.com or (408) 920-5833.