Friday, Jan. 18, 2008

Final report on 2007 housing: It was the year of the plunge

Home sales and median price down double digits valleywide

Dismal figures on valley real estate sales and prices released Thursday for December marked the end of a tough year for the industry, professionals acknowledged.

The best they could say about 2007 was that there are a lot more affordable homes on the market now in the Northern San Joaquin Valley and interest rates are low, staying at less than 6 percent for the second straight week.

In Stanislaus County, sales were down 38.8 percent last month compared with December 2006. San Joaquin County's sales volume dropped 37.2 percent and Merced County's 56.8 percent.

The median price for Stanislaus County homes sold last month was $281,250, while San Joaquin County's was $320,000 and Merced County's, $257,000. San Joaquin and Merced counties' numbers were down from December 2006 by 24.7 percent and 21.2 percent, respectively.

Those numbers were reported by real estate research firm DataQuick Information Systems, which noted that Merced County's figures don't include sales on the last two days of the year. Figures for Tuolumne County were not available.

"Brutal. Just brutal," said Realtor Rob Ellett of PMZ in Mo- desto, when asked to sum up 2007. "The good side is that prices are coming back to reality."

Ellett said he sees numerous listings for three-bedroom, two- bathroom homes that are less than $200,000, a price that was unheard of two years ago for a house that size.

Prices dropped for most months in 2007 in the valley. For the year, the median price fell by $73,250 in Stanislaus County, $80,000 in San Joaquin County and $68,000 in Merced County.

As prices declined, new home construction slowed. Builders in the valley were forced to offer incentives, slash prices and even abandon projects. Nationwide, new home starts fell 24.8 percent in 2007, the largest decline from year to year in 27 years, according to the Commerce Department.

Jobs lost in real estate

By most estimates, the valley leads the nation in foreclosures, a trend exacerbated by falling home prices that make it more difficult for owners in mortgage trouble to refinance or sell.

Banks that repossess homes often sell them for less than market value, as do homeowners who are behind on mortgage payments and face foreclosure, resulting in so-called short sales.

"Short sales are what's causing us grief," Ellett of PMZ said.

The fallout led to sharp job losses in real estate, said Ninon Lapan-Dalman, a Realtor and co-owner of Weeks Real Estate in Modesto.

"I've seen a tremendous amount of agents get day jobs and now do real estate on the side," she said. "And I've seen mortgage lenders just disappear."

Neil Weese, sales manager and partner in Coldwell Banker Endsley & Associates in Turlock, said December was a slow month to end a slow year.

The upside, he said, is that 2007 put buyers in control, because sellers are more willing to make concessions while interest rates remain low.

Mortgage rates down

Mortgage rates are at their lowest level since summer 2005, at 5.69 percent Thursday, according to mortgage company Freddie Mac. This was the third consecutive week such rates had fallen.

What that means for 2008, some real estate industry professionals said, is that more people might go from browsers to buyers.

"We're still seeing a lot of interest, it's just that the buyers are unsure," Weese said. "We're not at the bottom of the market, but we're getting pretty close."

Weese and others said real estate investors are re-entering the market.

But now, said Larry Matos, broker and co-owner at Century 21 M&M and Associates, investors must make 20 percent to 25 percent down payments. He said that keeps out speculators who pay little up front and try to sell quickly.

For all sellers, Matos said, 2007 was painful and it may take more time for prices to recover.

"We're beyond a transitional market," he said. "Buyers now are just cautious, not cautious and nervous."

Prices won't improve, he said, until the housing inventory is reduced. That may not happen this year, Matos said, but sales volume probably will be higher as investors and others buy up the bank-owned homes.

Lapan-Dalman of Weeks Real Estate said she thinks 2008 will be better because buyers will get tired of negative news.

"I think we might be starting to turn a corner," said Lapan-Dalman, who added that she'd pre-approved five buyers this week for loans.

"The problem with waiting for the bottom is you can't predict it until it's in the rearview mirror," she said.

Bee staff writer Ben van der Meer can be reached at bvandermeer@modbee.com or 578-2331.