Home sales up for 2nd month

That's two in a row.

But is it a trend that will hold?

For the second straight month, the Sacramento region showed year-over-year gains in home sales as falling prices and growing numbers of bank-owned homes prodded bargain hunters off the fence.

May saw 3,420 buyers – the most in 20 months – close escrow for new and existing homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to DataQuick Information Systems.

Prices, however, didn't show the same strength. Median prices have dropped in double-digit percentages in all eight counties over the past year.

The May sales burst, coming after a similarly strong April performance, raised hopes that the market is trying to stabilize. Yet as the housing downturn nears the end of its third year, worries remain about the growing pileup of foreclosures overrunning the market.

Since January, banks in the region have foreclosed on 10,224 homes, according to the Web site Foreclosures.com, based in Fair Oaks. At the same time only about half the number – 5,448 – of repossessed homes were sold, DataQuick reported.

"The sales numbers are great, and if we can keep on that track we could have just a slight decline in value," said Scott Thompson, a partner in Mortgage Resolution Services in Carmichael. "But we're still foreclosing on more than we're selling, and that's the troubling part."

The highlights from DataQuick include:

• Sales rose from 3,163 in April and 3,216 in May 2007 to 3,420. The peak year for May sales during the boom was in 2004, when 6,761 homes sold.

• Slightly more than half the region's sales of existing homes – 51.1 percent – involved repossessed residences owned by banks. That cut the market share for new-home builders to 13.9 percent, down from 24.4 percent a year ago.

• Absentee owners, typically investors seeking rental properties, accounted for an estimated 19 percent of all sales. At one point near the peak of the boom, investor share reached almost 27 percent.

• The number of for-sale signs continued to fall in May across El Dorado, Placer, Sacramento and Yolo counties. Sacramento researcher TrendGraphix reported 12,366 homes for sale, the lowest number in 14 months.

"The Valley for a lot of people is discount central, and Sacramento is in the heart of that," said Andrew LePage, analyst for La Jolla-based DataQuick.

LePage said several inland California counties burdened with foreclosures – San Joaquin, Stanislaus, Riverside and San Bernardino – also saw year-over-year sales gains in May.

Sacramento County, the largest player in the area's real estate market, propelled most of the gains. The county tallied 62 percent of escrow closings, a 30.8 percent gain over the same time last year.

The result: Sacramento County had its strongest year-over-year performance since March 2005, according to DataQuick.

Year-over-year sales were up 15.2 percent in Yolo County, 1.8 percent in Yuba County and 1.4 percent in El Dorado County.

But prices continued to drop.

Sacramento County's median sales price of $225,000 is almost 35 percent lower than the same time last year. That median price – where half cost more and half less – hasn't been so low since January 2003.

At $339,750, Placer County median home prices are down 20.8 percent in the past year.

Analysts cite one reason for the rising sales and falling prices: a glut of discounted bank-owned homes that now rule the market.

The Sacramento County Association of Realtors said 65 percent of May's existing homes sales in Sacramento County and in the city of West Sacramento were bank repossessions.

In Elk Grove's 95757 ZIP code, home to thousands of homes built from 2002 to 2005, 78 percent of sales involved foreclosed property. In Galt, 77 percent were, according to DataQuick.

Conversely, said LePage, areas closer to downtown Sacramento "are holding up relatively well."

Placer County, the second biggest sector of the region's market, also is behaving differently.

While Sacramento County had its highest home sales since August 2006, Placer County sales were the lowest since May 1995, DataQuick reported. Its 518 sales were down 30.7 percent from May 2007.

Some of that is due to higher prices and fewer bank-owned homes. But it's also because there is less to buy now in Placer County, said real estate agent Gail Jones of Keller Williams Realty in Roseville. She said listings in Roseville and Rocklin are back to early 2007 levels, and sales rates have doubled since then.

Jones believes year-over-year sales hikes are here to stay.

"There are so many investors and first-time buyers out there. … I don't see that changing. I'm getting multiple offers on many of my good listings," she said.

Analysts say the economy and interest rates will help decide if the sales upturn becomes a trend. In Sacramento, mortgage strategist Brent Wilson of Comstock Mortgage said interest rates fell this week after rising sharply last week on fears of inflation.

"The bleeding stopped yesterday," he said Wednesday. "Yesterday was a good day, and today is a good day so far."

Wilson said the true test of the Sacramento real estate market will come "when we get to the seasonal slow times of the year – pretty much November through January. That's going to be the true test to see if this rally has legs," he said.

About the writer:

• Call The Bee's Jim Wasserman, (916) 321-1102. Read his Home Front blog at www.sacbee.com/blogs.