Thursday, July 06, 2006

'The Astute Buyer is Going to Sit and Wait and Watch'

At least the Bay Area housing market is not as bad as the Central Valley, says the San Jose Mercury News.

As Bay Area home sales boomed during the past decade, the spending spree extended to Central Valley towns where workers willing to brave hours-long commutes could buy sprawling homes for the price of some one-bedroom Silicon Valley condos. Now, it's a far different market. Communities like Los Banos and Tracy are experiencing a real estate slowdown more pronounced than the one under way in the Bay Area, partly as a result of rising commute costs, creeping mortgage rates and home prices that might have soared a bit too high.

Prices are sliding from the peaks they reached last fall, and the number of homes for sale has more than tripled in some areas. Visitor traffic to new home builders' sales offices is off by nearly a third since last year, and builders are offering thousands of dollars in incentives to get buyers to sign on the dotted lines. "It's definitely a buyer's market," said Steve Smiley of Hanley Wood Market Intelligence, a home building research firm. "You're going to see the incentives stick around for a while..."

Sales of new and resale homes in the vast Bay Area bedroom community formed by San Joaquin, Stanislaus and Merced counties were down 29 percent in the first five months of this year compared to the same period in 2005, according to DataQuick Information Services. That's a steeper drop than the 19 percent decline in the Bay Area.

But what's more sobering for home sellers in inland counties is how many homes are piling up on the market. In San Joaquin County, home to communities like Tracy and Manteca, nearly 4,000 existing houses were for sale at the end of May, about 3 percent of homes in the county and nearly 250 percent more than the amount in May 2005, according to Trendgraphix, a real estate research company in Sacramento. The same trend is true in Stanislaus and Merced counties...

Donna Baker, an agent with Preferred Real Estate Group in Tracy, said many prospective buyers who work in the Bay Area are shying away from homes in Tracy now, given how much the commute would cost them. "People are making decisions now to stay over the hill because of gas prices,'' she said. That and the fact that sellers are dropping their list prices little by little means that "the astute buyer is going to sit and wait and watch. There's no sense of urgency like there was before."

Brian Gentry put his four-bedroom, 2 1/2-bath house in Los Banos up for sale by owner in April at $585,000. Since then, he's dropped the price by $20,000, hired a real estate agent to help him market the place, and is offering $4,000 toward closing costs. "Then we're throwing in, of course, all the window coverings," and the new stainless steel refrigerator, plus offering a bonus to a buyer's agent who can close the deal fast, Gentry said. There are enough competing "for sale" signs in his neighborhood, where many people commute to Silicon Valley jobs, that "I can see two just from my lawn..."

With new-home builders offering generous incentives, sellers of existing homes, like Gentry, are feeling the pressure, especially when prices of the new homes are not much higher than those of the existing homes. To his list of concessions, Gentry recently added a $1,000 bonus for any agent who can bring him a buyer that can close the deal by Aug. 15.

Gentry, his wife, Cindy, and 3-month-old daughter, Chloe, are planning to move in August to the new house they just bought in the Merced County town of Atwater. Cindy will commute to her teaching job in Los Banos. Brian, who for years commuted to a Bay Area job as a regional operations manager for a staffing company, will stay home with the baby for several months.

Though he can afford to pay both mortgages for a while, Gentry said he's anxious to sell the Los Banos home, which the couple paid $310,000 for in 2003. The couple got one low-ball offer a few months ago, but nothing recently, Gentry said as he pointed out the neatly landscaped yard and the spacious formal living room -- all kept immaculate in the event that house-hunters pop in. "All you've got to do is say the right word," Gentry advises prospective buyers, "and we'll talk."


smoggiebakersfield said...

Just maybe, if these greedy sellers would lower their price $100K more, they might be able to pull it off and find a buyer.

They bought at $310K in 03 and expected $585k in 06 WOW! Seeing the property was originaly for sale by owner. That's pure GREED! $275K profit I dont think so, not today!

Happy Renter said...

Nothing has really changed in Sacramento since 98', except home prices. With the boom over and inventory levels where they are the reality is we have already backtracked 30%. Had this been the stockmarket we would have seen it already, but the inefficiency of the real estate market slows the decline.

Happy Renter said...

H-P plans on closing and consolidating sites due to Real Estate cost. The roseville plant may get a hair cut.

t said...

i'm looking for the right word and can't decide between foreclosure or bankruptcy...if he asked for the right phrase it would be "35 cents on the dollar"

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Diggin Deeper said...

This is probably the "heart" of the real estate market in the valley. The "move up" buyers, imho, are really the ones who make or break pricing. They are established, have equity, two stable incomes, and the desire to chase the dream. Unfortunately, with high inventories, foreclosures, and up to 25% of the bottom side of the market in turmoil, this guy's in trouble. If he wasn't willing to accept an offer a "few months ago" what makes him think that he'll get anything close to what he's asking? If it's been on the market for any length of time with no hits, wouldn't a serving RE agent suggest he lower the price in order to sell? Be interesting to follow this one to see how it really pans out