House prices continue to slip, sales pace quickens

Home prices continued to slip in Merced County last month. Prices dropped as well in Stanislaus, San Joaquin and Tuolumne counties, evidence that the three-year housing slump is still playing out.

Merced and San Joaquin counties had increases in the number of sales last month, but Tuolumne County dropped.

All three counties have had major declines in median prices since December 2007 -- 51.8 percent in Merced, 47.5 percent in San Joaquin and 25.3 percent in Tuolumne.

Stanislaus County's median sale price was $157,500 in December, down 1.6 percent from November, according to MDA DataQuick of San Diego County, a real estate tracking firm.

Year-to- year, the change is more pronounced. Last month's median price was 44 percent below the $281,250 in December 2007 and 60 percent off the $396,000 in December 2005, when the bubble was at its biggest. Stanislaus County's median price now is where it was in early 2001.

The reduced prices have brought out buyers: MDA DataQuick reported 1,046 sales in Stanislaus County last month, compared with 433 in December 2007.

"We're seeing a lot of investors buying houses and turning them into rentals, and we're seeing a lot of first-time buyers," said Larry Matos, co-owner of Century 21 M&M and Associates in Modesto.

Matos, whose firm is among the largest in the Northern San Joaquin Valley, said he expects 2009 to be fairly flat. The median price might go up or down 5 percent, but the sharp swings of recent years are unlikely, he said.

Matos said the market has reached the point where mortgage payments are about equal to rent, so renters are becoming buyers.

Average 45 days on market

The pace of home sales clearly has picked up, said Craig Lewis, president and chief executive officer at Prudential California Realty in Modesto, another major firm.

He said Stanislaus County homes that sold last month were on the market an average of 45 days, compared with 76 days a year earlier.

Lewis said the rising unemployment rate could dampen the market, but that could be offset in part by the reduced mortgage rates.

"It's really an exciting time for those who want to own real estate," he said.

The market would get even better if lenders modified loans for homeowners at risk of foreclosure, thus keeping these houses from flooding the market, he said.

Experts said the California housing market is being driven by bargain hunters snapping up bank-owned foreclosure properties, which accounted for 58 percent of existing homes sold last month, up from 24 percent a year earlier.

"The processing of these distressed properties is almost reaching a frenzied level," said John Karevoll, a DataQuick analyst. "Many of the banks just want to get these properties off their books. People are flocking to buy these foreclosure properties."

Richard Green, director of the University of Southern California's Lusk Center for Real Estate, said the market is being hammered by tight credit, expectations of further price declines and job losses.

"If you see the unemployment rate turn around, that's when you'll start to see housing prices bottom and start turning in the other direction," Green said. "Until that happens, I'm pretty gloomy."