Price slump eating away home equity

A persistent housing slump that has relentlessly driven down home prices has now wiped out at least three years of home equity gains across much of the Sacramento region, a real estate trend watcher reported Thursday.

Median sales prices for new and existing homes combined are back to mid-2004 levels in Sacramento and Placer counties, according to statistics released Thursday by La Jolla-based DataQuick Information Systems. In Sacramento County, median prices – where half of homes sell for more and half for less – are again below $300,000.

For buyers, who have driven home sellers and much of the real estate industry mad by patiently remaining on the fence, it's fresh proof of a market getting ever more warm and friendly. That's especially true in suburban neighborhoods with plenty of new construction.

"I've got two sets of buyers looking at property in Lincoln, 2,943 square feet listed for $325,000," said Viki Benbow, a Coldwell Banker real estate agent. "It's like $106 or $107 a square foot. Those houses three years ago were selling in the mid-$500,000s."

For sellers, though, it's not so rosy. The new sales and price numbers reveal a market heading into the traditional slower winter season firmly in the grip of a slowdown that began in late summer 2005. Many forecasters say 2008 will bring more of the same.

Banks, too, have become powerful competitors as they try to sell the rising numbers of properties they've taken back in foreclosure.

"Several factors are conspiring to push that median down so low," DataQuick analyst Andrew LePage said. "Jumbo loan financing has gotten more expensive and harder to get, foreclosures are a growing competitive factor in more and more neighborhoods and a lot of potential buyers have concluded it pays to wait."

The combination, he said, "is opening the door to more people looking to buy a house in the long haul."

Other DataQuick highlights:

• There were 2,467 new and existing homes that closed escrow last month in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's up from 2,391 closings in September, but about 1,000 fewer than the same time a year ago.

• The number of homes closing escrow in October was at mid-1990s levels in Placer and Sacramento counties. By comparison, new DataQuick figures show Bay Area and Southern California sales are at 20-year lows amid a rise in interest rates for "jumbo" loans above $417,000.

• Sacramento County's median sales price for new and existing homes combined fell to $299,500 in October, the lowest since April 2004. Median prices have now fallen 22.6 percent from their August 2005 peak of $387,000, DataQuick reported. Sacramento County is the area's largest market.

• Placer County, the second largest market, registered an October median price of $402,500 for new and existing homes. That's 23.4 percent off a December 2005 peak of $525,500. The new price is the lowest since June 2004.

• For existing homes only, Sacramento County reported a median sales price of $295,000, the lowest since June 2004. Prices are down 21 percent from their August 2005 high of $374,000.

• Placer County showed a median sales price dip to $400,000 for existing homes, the lowest since May 2004. Prices have fallen 20.8 percent from their August 2005 high of $505,000.

Among buyers reaping a bonanza of falling prices was Joanne Higginbotham, who moved to Sacramento a year ago from Oregon. She closed last month on a two-bedroom, one-bath 1916 bungalow in Sacramento's Curtis Park. She moves in next week.

"The budget was a big factor. It was a bank-owned property," she said. "I got it for $90,000 less than the prior owner paid for it two years ago."

Higginbotham, 41, isn't much worried about 2008. "I plan to stay a long time," she said. "I've been wanting an old house all my adult life."

DataQuick estimated that 27.6 percent of the region's existing home sales in October involved foreclosure properties. It was 35.9 percent in Sacramento County.

Mike and Kristi Colaco also closed last month on a newer four-bedroom house in a Sacramento County neighborhood called Independence at Mather. It came with a pool and a quarter-acre lot.

Two weeks after moving in, the two, both in their 40s, say they're happy with their price, the interest rate on their mortgage and a location closer to their jobs.

The Colacos say they, too, will ride out the market downturn.

"We're planning on staying here quite a few years," said Mike Colaco. He said real estate "is always good long term."

October ended with 15,716 homes still on the market in El Dorado, Placer, Sacramento and Yolo counties, according to Sacramento-based TrendGraphix, a research firm affiliated with Lyon Real Estate. That's the second consecutive month the number of homes for sale declined. That inventory peaked in August with a record 16,262 for-sale signs across the four counties.

The number does not include foreclosures that have taken place but aren't yet on the market. DataQuick said 65 percent of homes that went into foreclosure between Aug. 1, 2006, and July 31 have not been sold yet.

In the first nine months of 2007, more than 6,500 homeowners have lost their residences to foreclosure in the eight-county region. That wild card concerns Lyon Real Estate's Michael Lyon.

"No one has seen this before," he told a gathering of area home builders earlier this month. Lyon predicted 2008 could see another 10 percent to 15 percent drop in sales prices in some suburban areas.

Interest rates, meanwhile, remain at a six-month low. On Thursday, mortgage giant Freddie Mac reported a 6.24 percent rate for 30-year fixed-rate loans, unchanged from last week.

About the writer:

• Call The Bee's Jim Wasserman, (916) 321-1102