By Jeff Hudson | Enterprise staff writer | August 15, 2008 11:54
Marta Juliao and her husband Carlos Puente look at samples of new kitchen tile colors in their new home in Wildhorse. The couple sold their Mace Ranch home this summer and moved to a larger, four-bedroom house fairly nearby. (Wayne Tilcock/Enterprise photo)
Who buys a home in today’s market? People who have a good reason to do so.
Marta Juliao, who teaches Spanish at the Davis Waldorf School, and her husband Carlos Puente, a professor of hydrology at UC Davis, have two children, ages 8 and 11. Juliao and Puente felt they needed a little more elbow room.
The family had been living in a three- bedroom, two-bath home in Mace Ranch, ‘but it had been small for a long time,’ Juliao said. They considered homes in Woodland, but didn’t want to make their kids change schools. So they started looking in the northeastern part of Davis.
‘Our old house sold fast. There were three offers in a week,’ Juliao said. That house fetched a price in the lower $500,000 range.
The couple looked at somewhat larger homes in the $600,000s and $700,000s. They found themselves making offers on houses that were attracting other offers as well. They finally purchased a four-bedroom house in Wildhorse. In addition to picking up a bedroom, their new place has an office. Juliao likes having a room to do her grading and lesson plans. ‘And there’s space for the kids to play. And the lot size is bigger in the back,’ she said.
‘In 2005, it would have cost too much for us,’ she said. But prices have come down.
Other Davis sellers, however, are finding it takes longer to find a buyer, if they can find one at all. Some houses linger on the market for months, particularly those on the higher end. Herb Cross, who manages the Lyon Real Estate offices in Davis, Woodland and West Sacramento, said that during the first six months of 2008, only four Davis homes sold in the $900,000 to $1 million range, and four more sold in the $1 million to $1.5 million range, plus one home that sold for more than $1.5 million.
‘It’s a tough market in the upper price brackets,’ Cross said.
The pace is busier in the middle range. Cross said during the first six months of the year, 42 Davis homes sold between $300,000 and $400,000. Another 52 Davis homes sold between $400,000 and $500,000, and 49 homes sold between $500,000 and $600,000.
A quick start
In fact, the summer started out pretty briskly for local Realtors.
‘We had our best June in four years’ in terms of the volume of homes sold, said Doug Arnold, owner of Coldwell Banker-Doug Arnold Real Estate. ‘But in July it went back exactly to where it was last year at this time,’ and things slowed down again.
Prices in Davis continue to run considerably higher than in surrounding communities. The median price in Davis has been hovering in the low $500,000s, and dipped to $489,000 for the second quarter of 2008.
Coincidentally, the median home price for the San Francisco Bay Area also dipped to $485,000 in June - the first time in more than five years that the Bay Area median moved below the $500,000 level, according to DataQuick Information Systems. DataQuick includes Solano, Napa and Sonoma counties in its Bay Area figures.
Davis home prices are unquestionably down compared to last year, about 7 percent.
In Woodland, by comparison, the median home price is running in the upper $200,000s. Pretty much the same goes for West Sacramento. And in both cities, prices have come down around 25 percent from last year.
Prices around the Sacramento region are taking a tumble. The National Association of Realtors released quarterly statistics Thursday for the metropolitan area, and concluded that ‘the steepest declines in single-family home prices in the second quarter were in the Sacramento-Arden-Arcade-Roseville area of California, where the median prices of $229,500 dropped 35.6 percent from a year ago.’
In 2005, the National Association of Realtors pegged the median home price for the Sacramento region at $375,900.
DataQuick’s city-by-city breakdown showed a median home price at $179,000 in June for the city of Sacramento, a figure that looks almost Midwestern to many California real estate analysts. The median of $179,000 (based on 1,200-plus homes sold for the month) represents a 40.3 percent price decline for Sacramento compared to June 2007.
By contrast, there are virtually no homes in the under-$200,000 price category in Davis. In fact, there are very few in the $200,000 to $300,000 range -just eight transactions during the first six months of 2008.
Foreclosures high
The current prices in the Sacramento region are being depressed by the huge number of foreclosures. An article by Bloomberg News on July 31 said foreclosed properties accounted for 63 percent of June home sales in Sacramento County. Banks are selling foreclosed homes at steep discounts - in some cases, for roughly half of the price that the same homes fetched at the market peak in 2005. The banks want to get those foreclosed homes off their books.
The foreclosure numbers get even scarier as you move south. Bloomberg reported that foreclosures accounted for 66 percent of June home sales in San Joaquin County (including Stockton), 72 percent of June home sales in Stanislaus County (including Modesto), and 75 percent of June home sales in Merced County.
On Thursday, Irvine-based RealtyTrac reported July figures showing Merced now has the nation’s second-highest rate of foreclosures, with one in 73 homes receiving a foreclosure filing. Stockton and Modesto were described as ‘in a virtual tie’ for third place, with one in 82 homes receiving a foreclosure filing. The Vallejo-Fairfield area in Solano County was No. 8 on the list.
Davis is getting off light by comparison, and the less-volatile prices in Davis are related to the smaller number of foreclosures here. A check of RealtyTrac’s statistics on Thursday listed 24 Davis homes in ‘pre-foreclosure’ (meaning two or more late mortgage payments), with four homes in the auction phase of foreclosure and another 25 homes that are ‘bank-owned’ (taken back by the lender).
Neighboring Dixon, with less than one-third the population of Davis, had 105 homes in pre-foreclosure, 73 in the auction phase and 148 bank-owned homes, according to Thursday’s RealtyTrac summary
In Woodland, there are 257 homes in pre-foreclosure, 93 in the auction phase and 376 that are bank-owned.
Arnold told The Enterprise his company is handling foreclosed homes in Davis and Dixon that were financed through Countrywide Mortgage a few years ago. ‘We have two agents doing that full-time right now,’ Arnold said.
Who’s buying foreclosures in Woodland, Dixon and West Sacramento?
‘Investors,’ Arnold replied. ‘They see what were $400,000 homes that are now $250,000 or $225,000. They’re going to hold them, fix them up, rent them for three or four years. And someday, prices will start going up.
‘We’re also seeing some first-time buyers’ going after foreclosures in the region, Arnold said. ‘I don’t that know I’ve seen many in Davis.’
There are plenty of foreclosures in West Sacramento. The listings on RealtyTrac on Thursday indicated 315 homes in pre-foreclosure, 99 in the auction phase and 396 bank-owned.
For Sacramento, RealtyTrac reported 5,189 homes in pre-foreclosure, 3,182 in the auction phase, and 8,651 that are bank-owned. And for Elk Grove, the figures were 1,350 homes in pre-foreclosure, 709 in the auction phase and 1,799 bank-owned.
Solano County is getting hit as well. For Vacaville, the figures were 420 homes in pre-foreclosure, 259 in the auction phase and 562 bank-owned. And for Fairfield, the numbers were 796 homes in pre-foreclosure, 499 in the auction phase and 1,124 bank-owned.
The Los Angeles Times estimated this week that statewide, approximately 1,300 California homes are going into foreclosure on a daily bases.
Others feel the chill
Locally, the slowdown and downturn in the housing market also has meant hard times for real estate-related businesses. A few years ago, six title companies were doing business in Davis. Now there are only two, Placer and Fidelty.
‘Thirty years ago, First American Title was number one around here,’ Arnold reflected. But First American pulled out last fall.
The economic drag of declining home prices also has contributed to a drop in sales of large recreational vehicles - La Mesa RV in Davis will be closing in October. Sales at furniture stores and home improvement centers also have suffered.
The low median home price and large inventory of homes for sale in Sacramento is also making life difficult for home building companies. Asked about the $179,000 median home price for Sacramento during June, Arnold remarked, ‘The home building industry can’t build for that.’ Little wonder that the California Building Industry Association reported that in June, the Sacramento region had less than half the number of new home starts reported in June 2006.
The North State Building Industry Association, which serves the Sacramento area, is now touting the region as ‘the most affordable metropolitan area in California’ when median family income and median home prices are factored together.
Timing is everything
So is the market cycle approaching the much-discussed ‘bottom’? When is it a good time to buy?
That depends.
‘I think in the upper end, it’s certainly a good time to buy,’ Arnold said. ‘Some of the houses that were $1.2 (million) or $1.3 million are now $1 million, or under. And they’re going to go back up eventually, because Davis is Davis, and there are only so many homes in certain areas.’
Arnold also mentioned the traditional things that Realtors stress when showing Davis homes - good schools, attractive parks, low crime.
Cross said, ‘If you’re looking for a place to raise your family, now is a good time. There are advantages to owning property - pride of ownership, tax advantages, putting down roots, raising a family in a stable environment. You buy a piece of property, get a 30-year fixed mortgage, you know what your payment’s going to be. Your income will increase over time, your mortgage payment stays the same. That’s a huge advantage.
‘But if you’re looking to speculate, if you want to buy property and sell it for more in two years - you’re on your own,’ Cross said.
Cross advised that the difficulty with calling the bottom ‘is that there isn’t a light that goes on, and someone declares ‘We’ve reached the bottom.’ We won’t know we’ve reached the bottom until six months after we’ve reached it’ - and by that point, prices in the ever-cyclical realm of real estate have once more started to rise
