Some see opportunity in home price slump
By STEVE SINOVIC
NEWS-PRESS STAFF WRJTER
South Santa Barbara County home buyers have been jumping into the market, thanks to a decrease in the median price of existing homes from a year ago, particularly for properties listed way below $1 million. With the median price off by one-fifth, purchasing a single-family home or condo is a more affordable proposition for mostly high-income buyers who can swing mortgages and down payments.
"The market is definitely hot now between $500,000 and $750,000," asserted Realtor Gary Woods. "Anything in this range sells within 30 days," said Mr. Woods, co-owner of Home Realty, and who also crunches data on monthly home sales in Santa Barbara Real Estate, Goleta Real Estate, Carpinteria Real Estate, Summerland Real Estate, Montecito Real Estate and Hope Ranch Real Estate.
"When you get to this range of sales prices, there are a lot of offers, because so many home buyers are within reach of the $729,000 FHA maximum loan," he said. "Agents never used to talk about FHA," said Mr. Woods. "It never came up in the conversation" as a financing option. It certainly has been a motivator for buyers taking advantage of a 22 percent drop in the median selling price from September 2008. It currently stands at $750,000, down from last year's number of $1.1 million. In many cases, prices were dragged down by short sales. "That's certainly a determining factor," said Mr. Woods, who will soon finish compiling October 2009 numbers.
Of the nearly 600 homes listed in South Santa Barbara County; in September, 65 percent were priced above $1 million, but there's been a strong shift in what many people have been buying.
Of the 84 sales that occurred in September, Mr. Woods said 19 were homes priced between $500,000 and $650,000, many with multiple offers presented. "One buyer asked, Why isn't it (going) in the mid-500s?” said Mr. Woods, referring to a home that was perhaps priced for $800,000 a few years ago and is now selling in the mid-600s. "I told him that it's a good house at a good price and to grab it!" "It's fascinating how many (purchases) are coming in all cash," added Mr. Woods, referring to the feedback from other agents serving clients trading up from transactions elsewhere. He said September 2009 sale are 11 percent from last year when the economy started to fall off a cliff and many real estate deals came to screeching halt.
Condominiums have presented an interesting dynamic in the marketplace. Mr. Woods said that in the first nine months of the year, condo sales were up about 10 percent from 2008 levels. But the median sales price dropped about $100,000 from the same point last year to the current level of approximately $475,000. “The big story however, remains the sudden lack of inventory which is down about 75 properties from this time last year said Mr. Woods. He predicted a rise in the median price for condos given the current demand but fewer properties in the mix.
While lower prices were a draw, a few condo buyers couldn’t swing both the mortgage payments and homeowner association fees and backed out.
“Some condo complex (HOAs) are in the $400-$600 range, which is a huge mountain every month” for buyers Mr. Woods acknowledged.
Like other areas in California Mr. Woods and another real estate professional attribute a definite uptick in client activity in recent months as buyers chased the first time buyer tax credit. “It’s been spurring a lot of activity,” said Alyson Spann, president of the Santa Barbara Association of Realtor.
The tax credit program is set to expire Nov. 30, but potential buyers hoping to take advantage of the $8,000 incentive who haven't already started the purchasing process might be out of luck, said Ms. Spann, an agent with Comstock Homes.
Ms. Spann said agents told her they noticed more urgency with clients as the deadline-approached and they were keen to finish-the process. Ms. Spann said there Is momentum on the part of the National Association-of Realtors to lobby Congress to extend the tax credit and perhaps increase the amount. She said that a recent survey conducted by California Realtors found that 68 percent of the purchasers buying with FHA loans couldn't have completed the transactions without the credit.
She believes that reinstating the credit and maintaining the FHA loan limit along with historically low fixed interest rates for those who qualify will continue to stoke sales activity. That huge motivator should translate to better home sales numbers in October predicted Mr. Woods. "I don't know that it will be a surge, but it should be fairly strong," Mr. Woods said. Congress first approved a $7,500 tax credit in the middle of last year, but it had to be repaid over 15 years. In February 2009, the credit was increased to $8,000 and the payback requirement was dropped.
Buying and selling strategies occupy a lot of an agent’s time. With fixed interest rates in the 5 percent range, Ms. Spann said she advises buyers who quality “to grab” them rather than waiting on the sidelines for “sticky home prices to slowly drop.” With rates forecasted to rise in the next year, she’s advising clients to buy at today’s prices with the lower interest rates.
E-mail: ssinovic@newspress.com
Posted by gandlwoods at October 29, 2009 07:20 AM