Strong buyer demand and limited housing inventory is causing asking prices to move up.

(Source: Reed Fujii The Record, Stockton, Calif. (MCT)

San Joaquin County’s existing home sales have been relatively stagnant since the mortgage meltdown brought the once-stratospheric market crashing to earth.

With transactions dominated by foreclosure and other distressed properties, average sale prices on existing homes bottomed out in mid-2009 at about $170,000 and have run from $170,000 to $190,000 ever since, according to figures from Trendgraphix Inc. Sales volume has been stuck in a range of 650 to 850 per month in that same time.

But that may be about to change.

Single-family home inventories in San Joaquin County have dwindled from about 2,600 in September 2010 to just over 1,000 in May, the lowest level since the peak of the housing boom in 2005.

Area real estate brokers report strong activity, receiving multiple offers on homes within the first week of a new listing. And while closed sale prices remain little-changed, Trendgraphix reports that asking prices have risen in each of the past three months.

Jerry Abbott, president and co-owner of Grupe Real Estate in Stockton, said his office receives 10 to 11 offers on homes in its listings and has seen a $1 million-plus home sold in a week.

He noted the number of San Joaquin County pending sales – meaning deals working through the escrow process – at about 1,100 exceeds the number of homes for sale.

“When that happens, that’s when properties begin to sell before they even get into the multiple listing service,” Abbott said. “It’s a really hot, hot market.”

While reported prices based on closed home sales remain flat, the strong buyer demand and limited housing inventory is causing asking prices to move up.
“If people are looking for the bottom of the market, the place they have to look from now on … is in the rearview mirror,” said Larry Underhill of Statesman Realty in Lodi.
Reasonably priced homes coming on the market are receiving multiple offers. Underhill said he’s seen as many as 23 offers on a house in Elk Grove, where the market is even stronger than in San Joaquin County.

But there are barriers to price gains, even as would-be buyers try to outbid each other for attractive properties.

Brokers reported the primary snag is the home appraisal, which is largely based on recent sale prices on comparable homes.

“We’re at that messy-in-the-middle stage, where there is a lot of upward pressure on prices, but that’s mitigated by comparable sales from just a few months back,” Underhill said of the current market cycle.

For example, he represented a buyer on a Stockton home listed at $175,000, which drew eight separate offers, and Underhill’s client boosted his bid to $185,000. Despite the multiple price offers, however, the appraiser could only justify a price of $180,000, which then becomes the most on which a bank will lend.

The dominance of distressed properties is also a drag on prices, Abbott said.
In a short sale, where the price paid is less than the mortgage balance, the seller receives no equity return. Because of that, many short-sale sellers may be willing to accept a lower price – if the buyer makes an all-cash offer instead of requiring a loan – just to speed the process.
“If you’re a short-sale seller, you just want to get the thing done,” he said.

And there are a good number of all-cash sales as investors take advantage of low home prices, Abbott said.

“If you really look at the smart money, … the investors aren’t looking to (buy and resell homes quickly); they are buying to hold, because they’re looking at prices going up over the next five years,” he said.

“Investors are really ruling the market right now.”

Another factor helping reduce inventory is a better understanding and handling of distressed-property sales by all parties involved, said Art Godi of Art Godi Realtors in Stockton.

They are more complex and time-consuming to complete than other types of home sales, but more experience with such deals is paying off for real estate brokers and agents.

“We’re learning to play the game better,” Godi said.

Also, home buyers and sellers are more in tune with such issues.

“Typically, a buyer would lose two or three (homes) they tried to buy because they couldn’t wait through the process, or other problems,” Godi said.

And lenders, too, are more likely to accept a short sale – and taking a loss on a mortgage – than force a foreclosure.

“The lenders have improved their processing. They’re learning to do it better now, also,” he said.

At his brokerage’s morning sales meeting last week, Godi said the discussion turned to signs of an improving market.

“We were saying there are more and more, there are buyers out there. The prices are edging up,” he said. One agent reported he had been helping a client shop homes in the $90,000 range but had seen prices on those same homes rise to $110,000 over the past two months.
Underhill said he’s seeing an interesting trend among his return clients.

“I’m working with people who had to endure the pain of a foreclosure or short sale three years ago who are now eligible to buy,” he said.

“Now, they’re coming back.”

Contact reporter Reed Fujii at (209) 546-8253 or rfujii@recordnet.com

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