‘This is what recovery looks like’
As positive indicators continue to strengthen across the North Bay housing market, real estate leaders in the region expressed increasing confidence that housing is starting to recover from the crash of 2006.
Median prices have risen incrementally across the region, responding to a surge in new demand for homes in that price range. Foreclosure rates have waned, and more home sellers are leaving their transactions with equity.
“This is what recovery looks like,” said Rick Laws, regional vice president of Pacific Union International in Santa Rosa and long-time producer of a monthly housing report for Sonoma County. “First comes sales, then comes prices, then comes development.”
However, those professionals said they remain cautious that a full recovery will be a years-long process.
Demand remains high for discounted homes that are the product of foreclosure or short sale, yet brokers across the North Bay said they are now seeing multiple qualified offers for homes in median and “move up” price ranges as well.
“The average wage-earner now can afford the median price of a home in Sonoma County,” said Steve Herndon, coordinator of the real estate program at Santa Rosa Junior College and senior loan officer at American Pacific Mortgage. “There’s a bonanza of opportunity for property buyers today. I often kid, the mortgage rates today are the lowest they have been since the Roman Empire.”
While demand has risen, inventory is at a historic low across the North Bay. In Sonoma County, Mr. Laws said that the current supply is enough to satisfy demand for about two months. Typically, a supply for five to six months is considered sufficient, he said.
That demand has slowly driven up North Bay median prices. According to San Diego-based DataQuick, prices jumped the most in Sonoma County — up 13.1 percent to $345,000 in August from a year before. A median-priced home in Marin County was $634,000 in August, up 2.3 percent. In Napa County, prices rose 9.4 percent to $350,000. Solano County prices rose 2.7 percent to $190,000.
Movement has also been seen on the high end of the market, where buyers are now seeing homes beyond $1 million as an appreciating asset, according to Mr. Herndon. In Marin, the number of “luxury” sales reached a four-year high in July with 83 sales, according to a report from Coldwell Banker Residential Mortgage.
“I don’t know that we have a segment of the market where values are still going down,” Mr. Herndon said.
In addition, a number of federal refinancing initiatives have helped prevent some underwater homeowners from entering foreclosure and further depressing the market, including the Home Affordable Refinance Program, or HARP, according to Mr. Herndon. Those programs, along with traditional refinancing, have helped to prevent a so-called “shadow inventory” of preforeclosure homes from flooding North Bay markets.
The number of short sales — homes sold at prices lower than the mortgage amount — have increased in respect to foreclosure sales across the North Bay, said Robert Bradley, president and chief executive officer of Bradley Real Estate. Those sales have had a greater effect in lifting median prices.
“For the most part, banks have become much easier to deal with in getting short sales approved,” he said. “This gives buyers more incentive to purchase homes that are listed as short sales, and these homes are now selling much closer to market value then they were over the past five years.”
While about half of home sales in Napa County were bank-owned properties at the peak of the market crash, foreclosures now account for one quarter of sales, according to Elliott Faxstein, Napa chapter president for the North Bay Association of Realtors. Another 25 percent of transactions are short sales, and activity has increased in the $500,000-plus range through second-home buyers and retirees.
As demand has increased, construction of new homes has not yet responded. While a handful of projects are underway in the North Bay, regional leaders said that prices have not yet risen high enough to generate a return on investment for many developers. A number of smaller builders have transitioned to refurbishing existing homes that were purchased at a discount through distressed sales.
Despite the low inventory, sales volume has increased. There were 2,012 sales this year through August in Marin, compared with 2,362 in all of 2008, according to David Smadbeck, president of the Marin Association of Realtors.
“I think the volume speaks volumes,” he said. “If you can get into a house right now at 4 percent on a 30-year fixed mortgage, you’d be silly not to do it.”
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