The Blog Site for SCP Appraisal Service

By MICHAEL COIT
THE PRESS DEMOCRAT

Published: Tuesday, August 11, 2009 at 7:33 p.m.
Last Modified: Tuesday, August 11, 2009 at 7:33 p.m.

Sonoma County’s housing market inched closer to a bottom in July as sales of cheaper homes dipped, led by declines in purchases of bank-owned homes and other distressed properties that have dominated the market for the last year, according to a new study.

But sales of higher-priced homes ticked upward, a tentative sign the market is slowly returning to a more balanced spread of sales across price ranges.

Overall, buyers purchased 435 houses in Sonoma County in July, a 3.8 percent increase over a year ago, according to The Press Democrat real estate report provided by Coldwell Banker manager Rick Laws.

The majority of purchases remained under $400,000, which accounted for nearly 6 of 10 sales. But it was the lowest level in that price range this year, with sales of homes above the half-million-dollar mark rising to one-fourth of all purchases.

The change in the mix of sales eased the decline in the county’s median home price — the point where half of the homes sold for more and half for less. The July median of $364,000 was down 7.1 percent from a year ago, the smallest year-over-year drop since September 2007. The median price rose 9.5 percent from June, when the median stood at $332,500.

Sales of bank-owned properties and houses deeply discounted by homeowners avoiding foreclosure have dominated the market for the past year. But after peaking at three-fourths of all purchases in February, purchases of distressed homes dropped to 43 percent of all sales in July.

The supply of homes for sale also has fallen. There was just over three months inventory at the end of July, based on the pace of sales during the month. While that is considered a market roughly balanced between buyers and sellers, more people are chasing fewer homes at lower prices.

After seven months of house hunting, Debbie Godwin-Austen has come up short with six offers for homes, all priced under $300,000. She can make a large down payment, but continues to lose out to buyers with more cash, particularly investors.

“It’s very frustrating. You can’t compete with the people that are paying all cash,” the Santa Rosa resident said. “I’ve been in a house where two hours after it’s gone on the market it’s sold for more than the asking price and the buyer was paying cash.”

To improve her chances, Godwin-Austen might expand her search to homes above $300,000 or in neighborhoods with a greater choice of less expensive properties. She recognizes that homes haven’t been this affordable in Sonoma County in more than a decade.

“I’m still hopeful. I’m a strong buyer,” Godwin-Austen said.

Another factor in the tight supply is a significant number of homes tied up in short sales, where homeowners attempt to avoid foreclosure. Those purchases require that banks approve a sale for less than a borrower owes on their mortgage.

Short sales can be more complicated than a foreclosure sale and take far longer to complete. Sales can fall through if a bank declines an offer or a buyer finds another home while waiting.

But bargain shoppers could find more homes to choose from in the county in coming months.

A rising number of Sonoma County homeowners are falling behind on mortgages and could lose properties to banks. In the county, 5.5 percent of all mortgage loans were overdue three months or more in June, compared with 3.9 percent a year earlier, according to First American CoreLogic, a real estate research company.

Home prices overall are expected to continue falling through the end of this year, good news for buyers and bad news for homeowners struggling to hang onto properties, said Eduardo Martinez, a senior economist for Moody’s Economy.com who tracks Sonoma County and other California regions.

“Mortgage foreclosures are still rising, which will drive house prices down further. Thus, affordability has a chance to improve further, returning to its rate of the mid-1990s,” Martinez said.

Sonoma County’s housing market still should hit bottom sometime during the first three months of 2010, he said.

“The volume of defaults is not going to cause an avalanche of foreclosures,” Martinez said. “The housing market in Sonoma County will move closer to a bottom as 2009 progresses.”