Foreclosure sales drop to lowest level in 5 years
Published: Thursday, November 14, 2013 at 1:02 p.m.
Last Modified: Thursday, November 14, 2013 at 1:02 p.m.
For the first time since housing prices crashed, the rate of distressed home sales in Sonoma County has fallen to single digits.
Just 9 percent of the single-family homes sold in October were foreclosures or short sales, according to The Press Democrat's monthly housing report compiled by Pacific Union International Vice President Rick Laws. A year ago, such properties made up 29 percent of county sales.
Overall, buyers purchased 430 single-family homes last month, a decrease of 13.5 percent from a year earlier.
The median price rose to $466,750 in October, an increase of 3.7 percent from September and 27.2 percent from a year earlier.
Home prices peaked in Sonoma County in August 2005, when the median hit a record $619,000. But prices began a steady slide in the last half of 2007, followed by large numbers of owners who were upside down on their mortgages and either unable or unwilling to make further payments.
In 2008, a record 2,800 county homes were lost to foreclosure. In the last seven years that number has grown to more than 11,000 homes.
The houses and condos that were repossessed by banks, known as REO properties, short for “real estate owned,” flooded the market in late 2008. Distressed sales peaked at 76 percent in February 2009, the low point in a historic housing crash. By then, the median price in Sonoma County had fallen to $305,000, the lowest level of the crash.
Prices “just fell way too far for what the properties should have been. And it was simply because of the REO competition,” said Diana Blakeley, the owner/broker of Wine Country Real Estate Network in Cloverdale.
Foreclosures and short sales have been a significant part of the market for most of the past five years. Until June 2012, the portion of distressed sales never fell below 40 percent.
Short sales refer to transactions where the home is sold for less than the amount owed on the mortgage.
To many experts, the market has turned a corner, even if a full recovery has yet to occur.
By last year the county's single-family home sales exceeded 5,000 for the first time since 2005. And last April, the median price exceeded $400,000 for the first time in nearly five years.
Foreclosure activity, cash sales, investor purchases and similar measures “are now trending toward normal,” said John Walsh, president of DataQuick, a San Diego-based information service.
“We are still a ways away, but the market is slowly re-establishing equilibrium,” Walsh said Wednesday.
Laws of Pacific Union said increases in the median price at times have been largely due to shifts in sales toward higher-priced properties and away from starter homes. But this year, he said, the rise in prices is “more like real appreciation.”
That view was backed by DataQuick, which estimated that roughly three-fourths of the jump in the Bay Area's median price this year was the result of increased home values. The rest was due to a shift in the mix of homes sold.
October ended with fewer than 850 homes available for sale in Sonoma County, less than a two-month supply at the current sales pace. That remains considerably less than the roughly six-month supply that experts say is needed for a balanced market.
Agents and brokers don't expect a big upswing in inventory in the coming months, partly because so little new home construction has occurred in the last six years. Earlier this month, former UCLA economist Christopher Thornberg predicted low inventory levels will help drive up home prices 10 to 12 percent next year in Sonoma County.
Peg King, an agent with Coldwell Banker in Petaluma, said sales normally slow during late fall and winter. But some sellers have told her they won't list their homes until next spring specifically because they have heard that prices will rise next year.
“They have their ear to the ground,” King said of sellers.
Even though sales are slightly lower than last year, the market this year is poised to post its biggest revenue total since 2006. For the first 10 months of the year, agents have sold $2.45 billion worth of houses and condos.
The year has been especially good for King and her son Jeremy King. This summer their team ranked second among county agents for total revenue volume, and they recently surpassed the sale of 100 homes in a single year, a first for them.
For the entire Bay Area, buyers in October purchased 7,595 houses and condos, a decrease of 3.9 percent from a year ago, according to DataQuick.
The median price for those homes was $539,750, an increase of 29.7 percent from October 2012.
Distressed property made up about 14 percent of Bay Area sales last month, compared to about 35 percent a year ago, DataQuick reported.
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