CA buyers decend

Mercury News

GREGG WINCHESTER and his wife, Cynthia, made an offer on the 2,430-square-foot, four-bedroom, three-bath house the same day they saw it.

"We felt now was the time to purchase something for our family now that prices had come down," he said. The couple bought the bank-owned house for $355,000.

Sales rose in most of East Contra Costa County in April, but Brentwood sales, rising to 107 purchases, ensured some of the highest sales in the Bay Area, DataQuick Information Systems reported.

Sales also rose significantly in Antioch, Daly City, Fairfield and most of San Joaquin County — all areas famous for foreclosures.

"Does it signal an absolute bottom?" asked DataQuick analyst Andrew LePage. "That's still unclear."

Last January, Antioch had 25.6 months and Brentwood had 22 months of inventory, or the amount of time it would take for all homes to sell if no new homes came on the market. In May, those numbers changed.

"Now we're looking at 4.9 months in Brentwood and 11 months in Antioch," said Bryce Ellsworth, a broker with Windermere Ellsworth & Associates in Brentwood. "Prices have come down. ."‚."‚. People have held back in buying and suddenly homes are flying off the market," he said.

"Flying" may be too a strong word, economists said.

"I think the movement begins where the prices have gotten low because there are a whole bunch
Advertisement
Click Here!
of foreclosures. It's now become affordable," said Stephen Levy, director of the Palo Alto-based Center for the Continuing Study of the California Economy.

According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, price drops have changed affordability in the Bay Area — for the better.

In the East Bay, 32.4 percent of residents could buy a home in the first part of 2008 as opposed to only 17.4 percent in late 2007. In San Joaquin County, it went from 16.9 percent of people to 35.5 percent, while those on the Peninsula who could afford a home rose from 7.9 percent to 12.7 percent. Solano County's affordability rose from 20.4 percent to 35.1 percent.

First American CoreLogic reported prices in California declined 18 percent, with six markets, including Stockton, Merced and Modesto, experiencing price declines around 50 percent. The number of homeowners delinquent on payments rose from 1.5 percent in the first few months of 2007 to 4.8 percent during 2008. This "indicates that foreclosures and REOs will continue to rise for some time," the Core Mortgage Risk Monitor said.

Sean O'Toole, founder and chief executive officer of ForeclosureRadar in Discovery Bay, said that 22,324 homes reverted back to the bank in California in April. Of that, 954 were in Contra Costa County.

O'Toole, who also invests in real estate, said that the return on investment for buying distressed properties and renting them out is coming close to creating a positive cash flow. "We still have some people who are speculating that this is the bottom and they'll be rich in two years, but those are the same folks who got into trouble the last time."

Perhaps it's the price drops that are tempting more buyers. Homes that previously were selling for $800,000 can now be bought around $400,000, and although inflated prices were arguably due to a housing bubble, many are still attracted to what they view as a bargain.

Ellsworth said that homes that are priced well, especially foreclosures, receive multiple offers. And the majority buying are investors looking for positive cash flow, including himself. "Properties are being sold significantly below values. I think I'll take my chances," he said.

Mark Fleming, chief economist for First American CoreLogic, said that because of the tightening of the credit market in 2007, the number of loans with adjustable rates will peak and reset in 2008. He expects, as a result, that the numbers of foreclosures will begin to recede by next year.

"The ARM reset issue is coming to closure," he said. "But there's no guarantee prices won't continue to go down or whether it will rise, stay flat or reach back up to the prior peaks."

Fleming said that results can differ from recession to recession and he doesn't have a crystal ball. "It took the housing recession of the early 1990s until the late 1990s before it had recovered to pre-recession price levels," he said. "And if you look at 1910 or 1912, it wouldn't have been until the 1940s before it returned to price parity."

The Winchesters, who bought their Oakley home in 1997, wanted to move up to a home near the Highway 4 Bypass. He and his wife have decided to keep the Oakley house and rent it out to teachers at the private school where he works.

Although Winchester, 47, had to deal with some cracks in the pool and being overrun with mosquito larvae, he feels the Brentwood house was a good buy and paid 20 percent down.

"It was a great blessing," he said. Their home is scheduled to close June 20.

Barbara E. Hernandez covers real estate. Reach her at 925-952-5063 or bhernandez@bayareanewsgroup.com. Read her real estate blog, Property Lines, at www.ibabuzz.com/propertylines.
# FORECLOSED HOME SALES* Contra Costa County: 44.7 percent
# San Joaquin County: 70.2 percent
# San Mateo: 13.2 percent
# Solano County: 54.2 percent
*Percentage of homes that sold that were in foreclosure during the past 12 months
Source: DataQuick Information Systems