Real estate insiders say buyers are wearily reentering the
market with prices too good to pass up. But after months of high
foreclosure rates and dropping prices, they’re still cautious.
Real estate insiders say buyers are wearily reentering the market with prices too good to pass up. But after months of high foreclosure rates and dropping prices, they’re still cautious.
“All that’s selling right now are good deals,” said Roger Malech, a Realtor at Morgan Hill-based Intero Real Estate. “Buyers can take their time and only buy deals.”
Bay Area home sales edged up in April from a seven-month run of record lows, according to real estate news service DataQuick Information Systems. South County real estate agent Tony Lupina said for the first time in seven months, the number of homes on the market in Morgan Hill and Gilroy went down.
Even with April 2008 median home prices in Santa Clara County down 13 percent from April 2007 to $615,000, sales volume is still down 28.3 percent from the same month last year.
In April 2007, 2,009 homes sold. In April 2008, 1,440 homes sold, with Morgan Hill and Gilroy each contributing 26 homes. In Hollister, 44 homes sold.
The median price of a Morgan Hill home in April 2008 compared to the same month a year ago was down 19.9 percent to $623,500. The median price of a Gilroy home in April compared to a year ago was down 20.6 percent to $550,000.
The median price of a Hollister home was down 36.3 percent to $372,500.
Ironically, now is the time to buy, says Susan Jacobsen, a Gilroy real estate agent.
“I don’t know what they’re waiting for, but they’re waiting,” she said of buyers still on the fence.
Dominating the market now are foreclosures and other housing crisis-related mortgage deals which drive home prices down, real estate agents agreed.
Short sales are a large part of the puzzle, they say. A short sale is an agreement by a bank or mortgage lender to discount a loan balance because the mortgagor is experiencing financial difficulties. In a short sale, the homeowner would then sell the property ‘short,’ or for less than the outstanding balance of the loan, and payoff the outstanding balance. In a short sale, lenders have the possibility of losing less money than they would in a foreclosure because they save money for renovations and repairs needed for a home to be sold at the market price.
Up to 70 percent of South County homes with pending sales for May are foreclosed or are short sales, said Samia Reichel, assistant vice president of Gilroy-based Chicago Title. While Reichel wasn’t sure if May had the highest number of foreclosures and short sales ever, she said it was definitely “a big month.”
“We’re getting multiple offers on these homes because we’re going really low now,” Reichel said. “Banks are approving real estate agents to list at bargain-basement prices, $50,000 and $60,000 below market value.”
These lower prices mean that more people can afford and are eligible to buy homes, says Lupina.
“The short sales and foreclosures are concentrated in the $450,000 to $650,000 home range, and are being taken up by investors and first-time buyers,” he said. “There’s a value now, again.”
Lupina’s clients John and Karen Coleman fit the profile of first-time home buyers taking the plunge. Earlier this month, the 50-something couple made an offer on their first home, a foreclosed property in Gilroy.
“I am sensitive to the family that is losing this home, but I try not to ponder about it too severely,” John Coleman said.
Instead, Coleman is pondering on the home he’s buying, a two-story four and a half bedroom home with a three car garage in Eagle Ridge. Coleman said that for the same price – $800,000 – in San Jose he would get a 40-year-old home at 1,500 square feet. The home was purchased new two years ago for $1.1 million.
As real estate agents wait for more buyers like Coleman to take that plunge, they are at least heartened by the fact that the sales they are making will stick this time.
“Realtors can sleep a little bit better now that lending guidelines have tightened,” Morgan Hill Realtor John Telfer said.
Rene Kunz, Vice President and Managing Officer of Intero Real Estate Services in Hollister, said she’s optimistic that Hollister real estate will finish strong the second half of the year, noting the help of national economic stimulus efforts.
“I see a momentum building,” she said. “I feel the media is starting to talk positively about the opportunities available to buyers.”
Jacobsen said she saw a positive change at a recent open house she held.
“People looking seemed to be sincere,” she said. “They were interested buyers.”
Reichel just wishes she were one of them. But after the past few months her industry experienced, she said she couldn’t afford to buy.
“We all knew it was going to happen, but none of us knew that it would be this bad,” Reichel said.
Jacobsen agreed.
“My crystal ball disappeared a long time ago,” she said. “I think of real estate like the weather. You bring a sweater, and if you need it, you wear it. We adjust.”
