CA UT

Union Tribune

Problem mortgages will probably plague some recent home buyers for the rest of the year, but the outlook for new buyers appears relatively promising, with sellers likely to drop prices into 2008, according to experts at yesterday's Sullivan Group Real Estate Advisors quarterly conference.


Associated Press
New townhomes under construction in Davenport, Fla. April's 16.2 percent increase in sales of new single-family homes was the biggest one-month gain since a 16.4 percent surge in April 1993.
Tim Sullivan, the San Diego-based consulting firm's founder, said that with some holders of subprime mortgages defaulting on loans that are resetting at higher rates, the bulk of foreclosures are likely to occur in the next six months and into 2008 before trailing off.

But Sullivan's associate, Peter Dennehy, said only about 4.6 percent of sales involve foreclosures, far less than in the recessionary 1990s and a trend he called “something to watch” but still “manageable.”

And Jack L. Haynes, executive vice president of Countrywide Home Loans, said lenders are moving to deal with borrowers facing disaster. He did not offer any specifics, but his company and some other lenders have moved to work out new repayment schedules to avoid foreclosure.

“We're cleaning it up ourselves,” he said, warning against efforts to impose more lending regulations, such as those being considered in Congress.

DataQuick Information Systems expects to report today that the six-county Southern California region saw defaults rise nearly 159 percent last month to more than 9,200, compared with 3,562 in April 2006, and that foreclosures skyrocketed from 311 to more than 2,800 over the same period. San Diego's defaults rose from 554 to 1,346, and foreclosures increased from 85 to 525, April to April.


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But San Diego was painted as an area less vulnerable to any further major downturns, contingent on the health of the general economy. Reasons include relatively few unsold, newly built homes and new projects; steady if not improving job growth; and an earlier end to the housing boom than other markets where sales and prices are now in decline.

The most recent sales figures for San Diego showed a 13.5 percent year-over-year drop in April, compared with more than 30 percent year-over-year declines reported by DataQuick last fall.

Prices, which had peaked at $517,500 in November 2005 and lately dropped to as low as $472,000 in January, have recovered somewhat to stand at a median $490,000. But they remain 10 percent or more below where they stood a year ago in many neighborhoods.

One worrisome sign – a rise in resale inventories – may represent good news for buyers, Dennehy said. Many sellers have to sell and will lower prices to do so, when a year ago, many were simply testing the market to see if they could get a high price and would not negotiate if someone offered to pay much less.

“That probably will keep pushing prices down this year and next,” he said.

Seeking to contain the gloom that shows up in builder surveys, Sullivan assured his audience of about 100 builders, mortgage bankers and other development-industry professionals. “You'll still be around in five years.”

His advice for how to attract buyers: “Stage” the units to look like nicely appointed resale homes; landscape the front yards rather than offer expensive incentives or upgrades; accommodate buyers who have to sell their existing homes, possibly by buying the homes from them; and advertise specific sales programs rather than just touting a brand name.

One factor on buyers' minds is gas prices, the speakers said. They observed that $4-a-gallon gas could deter many people who previously might have opted for a 75-mile commute from a home in Riverside County to work in San Diego. “Location matters again,” Sullivan said.

Sullivan's expert on Imperial Valley, Adam McAvee, said that market is “struggling” from affordability and commuting issues to the point where the typical new subdivision is only selling 1.3 homes per month.

Roger M. Showley: (619) 293-1286; roger.showley@uniontrib.co