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Friday, Aug. 07, 2009

Housing boomlet frustrating home buyers

Many are once again taking advantage of low prices.

Last month, Daniel and Laura Eckman were hours from signing a contract to buy their first home, a $235,000 place on 21st Street.

It was triumphant moment for the husband and wife, who are both 31-year-old high school teachers. They'd spent the past six months trying to find a house where they'd eventually start a family.

Their goal was simple. They wanted a home priced about $250,000 in an older North Merced neighborhood, where houses were built with backyards. They didn't want to live in a recently built subdivision where the homes are crammed together.

The first offer they made, back in January, was on a short sale -- a deal when the current owner owes more than the home's worth and the bank is willing to take the loss. It took three months for Bank of America to deny their offer.

The Eckmans were poised to sign the contract on their latest offer and begin escrow. Then their agent called. Out-of-town investors swooped in with an offer of $240,000 that the bank accepted.

"You go out and you have a romanticized version of buying a house," Daniel Eckman said Friday. "Then you get out there and everything's killed."

All told, they've looked at about 25 houses and made four offers. Still, no home.

Once again, local buyers are getting squeezed out of the Merced market because of a short supply of houses and a spike in investors loaded with cash. Despite low asking prices, many homes being bid up because of the high demand.

Call it a recession-era feeding frenzy.

There's another round of foreclosures expected to flood the market with more homes and bring supply more in line with demand.

For the time being, however, real estate agents are warning local buyers that it's going to be a hard and potentially long process before a home is in their name.

There is slightly more than a one-month supply of houses on the market, one of the consequences of foreclosure moratoriums. In November 2007, there was a 30-month supply of homes.

Cash investors are returning to the Merced market because the homes are selling for less than what it would cost to build them, real estate agent Andy Krotik said.

Under most conditions, they make up five percent of buyers. Today, though, they make up nearly a third of the market, Krotik said.

While spikes in foreclosures have been described as waves and later tsunamis, Krotik is now calling what's ahead a blizzard. "It's going to snow and snow and snow," he said.

Loren Gonella, president of Coldwell Banker Gonella Realty, said his office closed 109 deals last month. He's heard there are hundreds of buyers with down payments in the bank and preapproved loans in hand.

The X-factor is whether there'll be enough buyers to absorb the coming foreclosures, he said.

With low interest rates and houses at an affordable level, that hasn't been a problem. "We have a huge pent-up demand for property, and it's not being filled," Gonella said.

While on hold with Gonella, a recorded voice explains that the real estate market is more challenging than ever.

The Eckmans couldn't agree more. On Thursday they submitted an offer on another house on 21st Street. They're waiting to see if it's accepted.

If it's denied, they plan to trudge on until they sign a mortgage. He admits it has been a daunting experience. "I don't know if it's a great time to buy for the common person," he sighed.

Or, to paraphrase the old warning: buyer, be there.

Reporter Scott Jason can be reached at (209) 385-2453 or sjason@mercedsun-star.com.