Despite the cocked hammer a state moratorium on home foreclosures may—or may not— have created, the two-year long deluge of bad news for the nation and California’s housing market may be nearing an end.
A bit of much-needed good news was delivered to the housing market on Thursday. U.S. existing-home sales rose for the third consecutive month, which is a “hopeful sign,” according to National Association of Realtors Chief Economist Lawrence Yun. “The increase in existing-home sales occurred in all major regions of the country,” Yun said in a statement issued by NAR on Thursday. “We expect a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions.”
That good news does, however, have a bit of a dark side to it—the nation’s median existing-home price was $181,800 in June, 15.4% below the same period in 2008. However, distressed properties accounted for 31% of those sales, bringing down the median price due to discounting.
But many Realtors around Southern California say that since the start of the year home prices have been showing some strength, and there’s an optimistic school of thought among experts who say the worst in the market is behind us.
Can anyone say “bottom”?
There are signs of home prices actually increasing in some areas of Long Beach, such as the 90808 area, where prices rose 3% year-over-year in June to a $510,000 median, and the 90814 area, where the median rose 2.6% to $585,000, according to a report by DataQuick.
The DataQuick report also contains a plague of uncomely year-over-year comparisons for Long Beach and surrounding areas, with the 90805 and the 90810 areas seeing median selling price drops in excess of 20% with a large number of reported sales—again, distressed properties are likely to blame, in part, for these sour figures. The drops are particularly noticeable in foreclosure-prone affordable areas of Long Beach and surrounding cities, such as Compton, where median prices have fallen well over 30% from a year ago.
However, Realtors like Richard Daskam, of Keller Williams Realty, who are keenly tuned to local home sales comparisons, and can often offer a more precise and timely opinion on the health of the local market more so that real estate information services, say selling prices in parts of Long Beach and surrounding areas have began to show upward momentum since the beginning of the year.
“Parts of Lakewood are up 10% since January, and the 90808 (in Long Beach) is up 10% since January,” Daskam says. “I did an interior inspection (recently) for this woman who was selling and she listed her home at $335,000 and she’s had offers at just under $400,000. And it’s a little two-bedroom one-bath nicely remodeled off of Wardlow.”
And while it appears there could me some more bad news in the way of foreclosures on the horizon for California, the good news is the state’s top authority on housing believes the numbers of anticipated foreclosures are being blown out of perspective.
One of the first signs the housing market may be looking up is in the form of multiple offers on homes listed for sale. “It’s very competitive for the very well-priced homes, particularly foreclosures, distressed properties,” Leslie Appleton-Young, chief economist of the California Association of Realtors, told me in a phone interview.
Additionally, Appleton-Young noted that Realtors representing home sellers are reporting that “there is often multiple bidding on properties.” And not only did single-family home sales rise nearly 25% last year, “we’re going to be up another 25% this year,” she adds.
Daskam says “regular homes are getting a lot of offers. Equity sales or REOs (real estate owned properties), they’re getting multiple offers.” And he says that in some parts of Long Beach selling prices have risen 10% or greater from a year ago.
And the better news is: it appears there is growing interest in well-priced properties from buyers seeking good deals, home sales are expected continue to rise at a rapid pace and many experts are now saying that now may be the time to buy.
One driver behind home sales and increasing interest in the market is what some would classify as “rock bottom” home prices—particularly prices on foreclosures and properties whose owners are in some stage of foreclosure—which are sparking the interest of people who have for the last two years steered clear of the market.
Moratorium—is the foreclosure hammer cocked?
“Many of the foreclosures are still priced under market,” Daskam says. That’s partly because market values were set three or four months ago. The lag is due to the failure by banks to recognize the current market value, because they are relying on initial valuations conducted before the federal and state moratoriums on foreclosures, he adds.
The California moratorium, for instance, which mandates that lenders postpone foreclosure auction notices by 90 days, may have created a backlog of foreclosures. Many large banks, which were exempt from the California law, appeared to have voluntarily obeyed the state law and withheld from foreclosing.
Backlog or no, there are signs of a rising tide—how high and how long that tide goes is highly debatable—of foreclosures. “We know that there’s a wave of foreclosures coming,” says Daskam, who does home valuations for banks as a side business.
In what’s known as broker price opinions (BPOs), agents are often hired by banks, at smaller fees earned by appraisers, to obtain three listing and three sales comparisons, giving banks a quick value, or snapshot, of the current value of a property so a property can be quickly priced and put up for sale.
Daskam says he’s received e-mails from three banks “saying that they all had over 5,000 orders for these snapshots.” All of those orders for property snapshots from are for properties “in some mode of foreclosure,” adds Daskam.
Appleton-Young says she wouldn’t classify the number of expected foreclosures to hit the market a “wave of foreclosures.”
For one thing, she adds, “there is some political pressure on lenders to be gentle with the foreclosure proceedings to see what else they can do. Am I expecting foreclosures to pick up in the future? Absolutely. But I don’t think it’s going to be nearly as big as it’s being reported.”