April 20, 2008
Realtors have been insisting for many months that this is a terrific time to buy a house: Prices are way down, selection is tremendous, and interest rates are relatively low.
Now buyers finally seem to agree. Stanislaus County home sales surged in March, and there's a giant backlog of pending deals working their way through escrow.
Nearly twice as many Stanislaus County homes sold last month as in September, according to statistics from the Central Valley Association of Realtors. And there are more pending sales than at any time in the past five years.
"Sales activities have exploded. We're seeing it all the way from Lodi to Los Banos," said Mike Zagaris, president of PMZ Real Estate, based in Modesto. "Home prices have dropped substantially. As a result, there's a flood of buying interest by families and investors."
Zagaris estimated that
70 percent of buyers are people who plan to live in the homes, with the rest going to investors snapping up rental property.
The deals are great, at least compared with the wildly inflated prices that buyers paid for property during 2005. Stanislaus County homes peaked at a median price of $392,000 in December 2005, and they've been plummeting since. March's median sales price was $232,163. That's a 41 percent drop.
"We've gone from very, very
unattractive prices to very attractive prices," Zagaris said. "It illustrates how the market can take care of itself."
Home values have fallen to 2003 levels, according to the Stanislaus County assessor's office, which is lowering tax assessments for 38,000 homes.
"For me, it's a good thing," said first-time home buyer Emily Pino, who is shopping for a downtown Modesto home. "It provides more people like me with an opportunity to buy."
Last week Pino, 25, made a $100,000 offer on a two- bedroom home on 15th Street that was built in 1885.
"I want to be able to walk to places and live on a tree-lined street," said Pino, a Riverbank city planner. She said she's not interested in the multitude of newer tract homes for sale.
There are plenty of houses of all types to choose from in Stanislaus County, where about 3,900 homes are on the market.
Bank-owned often spells delay
Tawny Holt and husband Philip Baird recently have toured more than 15 homes in Modesto's older La Loma and College neighborhoods. They hope to buy something this spring for $150,000 to $215,000.
"We currently have offers in on three homes," said Holt, a clothing designer who works out of her Modesto rental house.
She said most of the houses they're considering are in jeopardy of foreclosure or have been repossessed by lenders, which can draw out the buying process.
"We're having a heck of a time getting those deals closed," said Craig Lewis, president of Prudential California Realty in Modesto. He said bank-owned homes often have trouble establishing clear title to the properties, and the companies they use to process the paperwork "are just swamped."
Lewis said escrow delays often pose problems for buyers because their loans fall through. Many mortgage programs, he explained, have tightened lending standards significantly in recent months, forcing buyers to re-qualify.
"Even highly qualified buyers are having a hard time getting through the maze," Lewis said.
That's why there was a backlog of nearly 900 pending sales last month in Stanislaus County.
After two years of slumping sales and staff cuts throughout the housing industries -- including mortgage brokers, title company officers and real estate agents -- those left in business are busy.
"In the last week, I've been just bombarded with work," said Andy Constantinou, an appraiser for Stanislaus Appraisers. He said he has to hustle to keep up with changing home values. "The banks are selling foreclosed homes for way below the cost of construction."
Constantinou said there are "incredible opportunities to buy out there."
"Where you're going to see the biggest equity gains is in the ranchettes because they've taken the biggest hits," he predicted. He said rural homes that sold for $700,000 a couple of years ago now go for $400,000, but he doesn't think that will last long. "You can't go out and develop five-acre parcels like that anymore."
Gobbling up rental properties
Tom Nelson of Modesto said he considered buying a new ranchette outside Oakdale several years ago. The builder had it priced at about $1.2 million. The nearly 3,100-square-foot house was foreclosed on last year, and it's on the market for $649,000.
"If my wife would move, I'd buy it now," Nelson said.
He has been busy buying bargain-priced property in Modesto and Oakdale. He and a partner bought houses in October, February and again last week. Those three homes will be rentals for at least several years until the market recovers.
"We keep making offers," said Nelson, who puts about 25 percent down and finances the rest. "We'll probably end up buying 10 rental homes before it's over. The banks are almost literally giving them away."
Nelson is focusing on modest homes that he thinks he eventually will be able to sell to first-time buyers.
"We're looking for places that are almost ready to move into," said Nelson, noting that he doesn't want to do major remodeling. "And we want them in the right locations. We stay away from certain ZIP codes."
Investors vs. first-time buyers
Investors such as Nelson seek rental homes that can generate enough income to cover mortgage payments, taxes, insurance and maintenance costs.
"You can actually have a positive cash flow on rental property now, which wasn't the case two years ago," said Cindy Yoder, a broker with Coldwell Banker Vinson Chase in Modesto.
She said that's sparked a vigorous sales market for some Stanislaus County homes: "We get multiple offers on houses priced under $180,000 because investors are competing with first-time buyers. ... Those homes are selling for up over the asking price, sometimes by $20,000 or $30,000."
Some rental property investors are from outside the region, Yoder said, "and they'll buy without ever seeing the property."
The Northern San Joaquin Valley's foreclosure crisis has attracted the interest of bargain hunters from across the country.
Example: Joe Prisco of New Hampshire called The Modesto Bee last week to inquire about buying opportunities. He said he wanted to find a foreclosed home priced at $150,000 to $200,000 that he could rent out for a few years, then move into when he retires.
"You're in a good location there. I could drive to San Francisco or Reno or up to the mountains," said Prisco, who lived in Novato in the 1970s.
He said he's eager to leave the East Coast snow and humid-ity. "I just love your climate."
Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.