Communities in the Central Valley over the past five years have provided some of the most glaring symbols of the nation’s housing market collapse.
And now among the biggest concerns for home owners and buyers is whether things have finally settled down and shifted for the better.
As of February, one in every 177 houses in San Joaquin County and one in every 171 houses in Stanislaus Country was in foreclosure, according to Realtytrac. The Irvine-based company has rated Stockton and Modesto among the top-10 cities nationally for foreclosures in nearly every study it has released in the past three years.
The good news is that the market may have neared the bottom, according to Terry Hull, chairman and chief executive officer of Property Management Experts. The Stockton-based company manages properties and has been involved in area real estate since 1978.
“Everything I read says this is the bottom year,” said Hull.
In San Joaquin County, about 3.4 percent of homes with a mortgage were in foreclosure in March, down 1.2 percentage points from 12 months earlier, according to Santa Anna research firm CoreLogic.
Lower numbers of foreclosures and stagnant prices seem to be a trend across the Central Valley. The ebb in the flow of foreclosures has helped bring what was a 36-month supply of homes on the market in both Stanislaus and San Joaquin counties in February 2009 down to a 2.2-month supply of homes on the market in San Joaquin County and 2.1-month supply in Stanislaus County. The average is a 6-month supply of homes for sale at any one time.
“It’s kind of stabilizing in some markets, the lower price homes (under $200,000) are really moving quite well (in Stanislaus Country),” said Marya Pimentel, sales manager at M&M and Associates in Modesto. “Those make up a lot of cash buys.”
Sarah Fields, of the Carpenter Road PMZ Real Estate in Modesto, has also seen an increase in market activity, especially among cash buyers.
“I tell people, if you are willing to deal with an intense and competitive market, it is well worth your effort,” she said.
Cash buyers are another trend that has spread throughout the Central Valley and many of them are investors buying large numbers of houses.
“We have one investor that we are working with that said he wants to buy 2,000 houses in the Central Valley,” said Hull. “He’s working with companies from Sacramento to Bakersfield. He has $100 million in venture capital behind him.”
Despite recent activity, however, sale prices remain stagnant. Hull, who has been in the real estate industry since 1963, said that much of the price stagnation may be due to the market’s uncertainty.
“Nobody really knows what the shadow inventory looks like,” said Hull.
Shadow inventory refers to houses that are owned by banks, but have yet to be put on the market.
“I’ve read one estimate that said it could be 3.6 million homes,” said Hull. “Another said it could be up to 10 million homes.”
Another issue pressuring the market is that the home-buying process can be more frustrating than it was in the past for those not buying with cash. Federal Housing Administration guidelines have become stricter as to the condition of the property before a deal can be approved.
“For a straight-up I-want-to-live-there buyer, short sales have taken over,” said Beverly Lamontagne, a broker with Grupe Real Estate in Stockton.
Short sales, where a bank agrees to take less than the mortgage value for the house, made up 40 percent of sales in Stanislaus County and half of sales in San Joaquin County in January.
That leads to a host of new challenges for prospective buyers. Changes in the way that appraisals are handled also have affected both the price and time it takes to work though inventory.
“During the market height people could go to an appraiser and say ‘This is the offer. We need to hit this number.’ And usually the appraiser could make it work,” said Lamontagne. “Now, appraisers are under much more pressure to justify their appraisals.”
Appraisers contact with agents is much more limited than it used to be.
“If an appraiser needed some information about a property they used to come to us and ask,” said Lamontagne. “Now they have to find all that information themselves.”
Another issue facing buyers today can be the sometimes murky nature of ownership of foreclosed and short-sale properties.
During the height of the housing boom mortgages were often sold off to a variety investors. That can make negotiating a price a time-consuming proposition.
“In the past, we could go to a bank and know the person we were talking to had the power to make a deal,” said Lamontagne.
“Today, that may not be the case. That person at the bank may have to get approvals and that all takes time.”
A 30- to 60-day window for acceptance is the new norm – and 90 days or more is not unusual – for a person making an offer for a bank-owned or short-sale property.
While prices have remained stubbornly stagnant despite increased sale activity, many real estate industry professionals believe that prices will eventually trend higher.
“Here in the Central Valley, we have the one thing they’re never going to invent more of and that’s land,” said Hull. “The population increase has continued. Lack of supply will eventually create a demand for more houses. That will drive prices up.”