Foreclosures make up an increasing share of resales as prices fall

By Sanford Nax
The Fresno Bee

Investors and first-time home buyers were out in force last month, snapping up foreclosures and driving up sales of existing homes, a market tracking company reported Thursday.

Analysts say it is no coincidence that sales are soaring in regions where prices have plummeted. In Merced County, existing-home prices fell 43.2% to $130,300, and the area now is the most affordable market in the state. The median price of an existing home in Fresno County tumbled almost 32% to $168,000 last month from a year ago and on new houses fell 12.7% to $248,000.

Bank-owned houses are increasingly the product of choice, totaling 56% of the 799 resales in October, said MDA DataQuick of La Jolla. Only a month earlier, foreclosures represented 54.4% of all the sales. They comprised 15.4% of the market in October 2007.

Add new homes and condominiums, and the total number of houses sold in Fresno County last month reached 1,046, a boost of almost 40% from October 2007 -- and the highest tally since December 2006, according to DataQuick.

Other central San Joaquin Valley counties showed similar results: Total sales in Tulare, Madera and Merced counties climbed 21.3%, 78.7% and 177.5%, respectively, as the correlation between falling prices and increased sales strengthened.

Fresno real estate agent Michael Gavin said foreclosures are putting pressure on prices. He represents banks trying to unload houses they have repossessed, as well as traditional home sellers.

The traditional sellers are having to drop prices to compete, said Gavin, who knows of a family who dropped their price $20,000.

"A lot of people are buying, and a lot of investors are buying," he said. "Activity has picked up for me."

About 30% of his recent sales have been to investors. Banks, he said, have become more willing to deal as their fortunes sag under the weight of foreclosures.

Lenders also are more willing to pay for repairs required by the Federal Housing Administration, which has emerged as the major lender in this economic climate, Gavin said.

For example, he said Countrywide Financial agreed to spend $2,000 to paint the exterior and window sills of a foreclosure in addition to paying $6,000 in closing costs. That was on top of slashing the price $5,000, he said.

"Countrywide said, 'We want this off our books. Get it done,' " Gavin said.

Sellers of new homes are finding it tough to compete with the abundance of foreclosed houses, even though their prices are falling.

Production and sales are down so far that the president of the California Building Industry Association is predicting a shortfall of new housing.

"California needs to be building around 230,000 units per year to keep up with population growth, but we won't even build a third of that number this year," said Robert Rivinius.

The association is trying to juice sales by pushing Congress to increase the temporary homebuyer tax credit of $7,500 enacted earlier this year, and to make it a credit that does not have to be repaid.