Vacant and costly
Empty homes leave owners on the hook
02/16/2007 12:00 AM
02/16/2007 7:10 AM
Record numbers of homes are sitting vacant awaiting buyers in the United States. An estimated 2.1 million empty houses were listed for sale during October, November and December.
That's about 62 percent more than usual, according to U.S. Census Bureau statistics.
The glut of vacant houses is readily apparent throughout the Northern San Joaquin Valley, as bank foreclosures and former rental homes flood the for-sale market.
Empty houses cause hardship for owners, who often struggle to pay mortgages and upkeep costs on property they can't sell.
For 10 months, Harold and Donna Suender have tried to sell their empty Salida house. When they put the 2,305-square-foot home on the market in April, they priced it at $515,000.
But the slumping real estate market has forced them to repeatedly lower their price. This week, they dropped it again to $399,996.
"I've never seen anything like this," said Harold Suender, who bought a new home in Riverbank before the market turned. "That (near 20 percent price reduction) is a lot of money, but we have to get it sold. We can't cover two house payments forever."
The Suenders had hoped their Salida house would help fund their retirement. They bought it in 1994, then moved out in 2003. They rented out the four-bedroom house for three years, getting as much $1,650 a month.
But their renter moved out shortly after the home went up for sale. So no money is coming in, and the Suenders are paying for landscape and cleaning services to keep the house in top condition to attract buyers.
"Probably the smartest thing to do is try to rent it again, at least until the market comes back up," Suender said. "But I don't know how the rental market is now."
The answer to that is: Not good.
"The rental market is very soft and very tough right now ... and it's deteriorating," said Paula Leffler Zagaris, who leads Liberty Property Management, which handles about 1,500 rental homes in the Northern San Joaquin Valley.
Zagaris estimated that a home in Salida such as Suender's now would rent for about $1,250 a month. She said that's because so many homes that have lingered on the sales market have started flooding the rental market.
Conversely, since the oversupply of rental property has pushed down rents, many former rental-home owners are trying to sell instead.
"I get at least five or six calls a week from investors who want to know how much their rental home is worth. Then, when I give them the price, they get really quiet," said Mary Prieto, a Prudential California Realty agent who sold 80 homes in Stanislaus County last year.
Prieto said nine of her current 28 listings are vacant homes. Some are former rentals, but most are houses owned by people who bought elsewhere and since have been unable to sell.
Another reason behind the surge in empty homes, Prieto said, is the region's rapidly increasing foreclosure rate.
"I would say more than half the vacant homes on the market are owned by banks that have repossessed them," Prieto said.
Stanislaus and Merced counties, in fact, have among the highest foreclosure rates in California, according to the January 2007 U.S. Foreclosure Market Report from RealtyTrac.com.
Stanislaus County had 355 homes in mortgage default and facing possible foreclosure in January. That means about one in 425 homes are in the process of being taken over by lenders.
The situation is worse in Merced County, where 189 homes — or one in 362 existing homes — were in default in January.
By comparison, the home default rate was only 1-in-846 statewide and 1-in-886 nationally.
"We're definitely seeing an increase in foreclosure activity," said Chris Porter, a senior consultant with John Burns Real Estate Consulting, which tracks the market nationwide.
Builders lower prices
Porter said foreclosure rates tend to go up when the real estate market slumps because homeowners can't sell fast enough or get the price they need to save their homes from default.
That combination of a slow sales market, weak rental market, soaring foreclosure rate and excess new home construction created the glut of vacant homes for sale, Porter said.
During the last 10 years, the average number of vacant homes for sale nationwide has been 1.3 million, but last quarter it rose to 2.1 million.
"This means that builders may need to slow down construction even further," Porter suggested. He said the other option for builders is to lower prices to more affordable levels.
Many already have done so.
Anne and Jorge Acuna and their three children benefited from just such a price reduction on the new Waterford home they bought last summer.
"We saw a great opportunity and it was a place that we really loved, so webought it," Anne Acuna said. "We decided to move in first, then put our Modesto house on the market because itwas easier for us."
Their vacant Modesto home, currently priced at $379,900, has been for sale since August with little action.
Acuna remains optimistic, and she pointed out that previous real estate investments have gone well for her family.
"I don't think people should sit in a house they're not happy with," Acuna said. Covering the cost of two houses "is not easy, but we're tough people. It's nothing we can't handle."
And there are some advantages to selling a house that's vacant, according to Lynis Chaffey, an agent for PMZ Real Estate who has the Acuna home listing.
Chaffey said sales transactions on vacant homes often can close faster than those for occupied homes. She said empty homes also are easier for agents to show to clients and for inspectors to do their work.
On the downside, Prieto said, buyers are reluctant to spend as much for empty homes: "The minute they see a vacant house, no matter what the price is, they offer 10 percent less."
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