 |
| First-time buyer: Tumbling prices in central California have brought homes within reach of new buyers like Christine Amy.
A single mother of five, Ms. Amy has always been a renter but now plans to buy this two-story, four-bedroom house in Lathrop,
Calif. Tony Avelar/The Christian Science Monitor |
Home buyers stirring in some markets
Hardest-hit housing markets, such as in California, are seeing strong signs of activity.
from the December 16, 2008 edition
Page 2 of 2
Page 1 | 2
|
This feature requires a newer version of Macromedia Flash Player and javascript-enabled browser.
|
Reporter Ben Arnoldy tells the slightly wet tale of one new homeowner in California's Central Valley.
The $170,000 turning point, explains Mr. Muthart, represents the most an investor putting down 20 percent can spend if he is to come out in the black each month given local rents. Rents have an upper boundary beyond which potential renters are shopping to buy instead.
"The investors are creating logic to the whole process because prices aren't going to drop down [endlessly since investors] can make money at a certain number," says Muthart.
The pricing floor provided by these investors, however, has broken through several times when the number of new listings exceeded the ability of investors to absorb them, he says.
Few big-time investors
Most investors in San Joaquin County are locals – doctors and farmers and retirees – according to half-adozen real estate agents interviewed. Some agents have dealt with a few foreign buyers and big-time investors picking up dozens of properties, but those are exceptions.
"It's a mixed bag of types of investor buyers. It's the couple down the street that has a nice nest egg and who want to put it into something that will give them a good return," says Bev Marlow, head of the Central Valley Association of Realtors.
Investments in places like Stockton can compare favorably with other investment options right now, with a volatile stock market and certified deposits that yield 3 percent, says Sean O'Toole, head of foreclosureradar.com, a website that tracks foreclosures.
Strong rent prices are key to a good return, and rents have softened recently, says Muthart. But there is still a steady stream of renters coming from foreclosed homes.
"Renters are becoming homeowners, and homeowners are becoming renters," says Muthart.
But don't assume each foreclosure equals a new renter, argues Caroline Latham, CEO of RealFacts, a rental data-tracking firm. Many families who are foreclosed on will move in with another family or move to a cheaper region, not rent.
"We are seeing a return to the notions that [investors] had in 2005," warns Ms. Latham, referring to the buying frenzy in the run-up to the housing bubble peak. "They think they'll be able to rent it and come out smelling good."
Foreclosures may rise again
The other concern for any potential buyer is whether home values will drop much further.
Prices showed a slight gain in October over September in San Joaquin County. They might be firmed up further by a dip in new listings. Since February, every month has brought roughly 1,000 new listings in Stockton but November is suddenly down to 672, says Joellen Chappell, a Stockton real estate agent.
At the same time, many experts here expect listing activity to spike early next year. Banks have only temporarily slowed the movement of bad loans toward sales, perhaps, speculates Ms. Chappell, to grab a bigger slice of any federal bailout.
Oversupply doesn't help prices, but helping prop them up is the return to affordability.
Mr. O'Toole sees equilibrium returning with the median income in California now qualifying for affordable loans just above the median home price.
Stockton median prices, says O'Toole, have dropped even further relative to income. "At this point, I don't think you'll see more price declines in Stockton."
1 | Page 2
RSS feed
){kind=link}
){kind=link}