California coming out of Housing Slump!

Posted February 16, 2012 01:38 PM by Alyson Spann    

Attendees at the Santa Barbara Association of Realtors' annual real estate market update and forecast heard a bit of newfound optimism from keynote speaker Leslie Appleton-Young, who addressed an estimated 200 people at Fess Parker's Doubletree Resort.

After showing charts of locally available inventory, which traditionally takes a dip in the winter months, Ms. Appleton-Young said local Realtors may be in the delicate position of telling potential buyers "that we might be past the worst" of housing price erosion and they need to have realistic expectations, especially in South Santa Barbara County.

"People are still very interested in housing; it's just that they are interested in housing that's a great deal," said Ms. Appleton-Young, implying that most of the bargains locally may already have been scooped up.

There has been a bounce back from the bottom of 2009, and tax credits and low mortgage rates played a factor in improving 2011 housing sales, she said.

Sales of existing detached homes for 2011 in South County were 950 units, up 5.1 percent from the previous year; for North County the number was 1,285 units, a 7.7 percent increase.

For the same year, the median price of existing detached homes in South County was $790,000, a 7.1 percent decline from the previous year. Median price in North County was $235,110, a 9.1 percent drop.

"Your distressed market is small relative to the state and nation," said the economist, describing the market as "trifurcated." In Santa Barbara County, the data points to non-distressed properties accounting for 70 percent of sales; 14 percent are bank-owned; and 16 percent are short sales.

By contrast, nearly 47 percent of California home sales were distressed. She estimated that about a third of the homeowners carrying mortgages in the state are underwater.

The upside of the market continues to be low mortgage rates. "Affordability is fabulous right now," Ms. Appleton-Young said.

Short sales are especially problematic in getting sorted out, she said, given that there are usually secondary lenders who need to be satisfied for transactions go to through.

She projects a 1 percent increase in home resales statewide this year, with prices expected to rise by about 1.7 percent.

Unlike Santa Barbara County, sales of distressed properties will continue to account for much of the overall sales.

Housing permits in California were up 5 percent in 2011 from the previous year; whether that means construction is immediately taking place is unclear, Ms. Appleton-Young added.

The California median home price will increase 1.7 percent in 2012 to $296,000 in 2012, according to her forecast.

For some buyers, it will be difficult qualifying for loans.

"It seems it could be done in a more transparent and expedited manner," said Ms. Appleton-Young, referring to the 20 percent down payment requirement for a 30-year mortgage, a huge chunk of change for even the most modest of South Coast abodes.

Buyers and sellers should brace themselves, which means a lot of hand-holding by Realtors.

"A year ago, 10 percent of contracts for houses fell out (of escrow) because of some issue," said Ms. Appleton-Young.

Today, it's a third, she said, adding that common culprits are "loans not funding or appraisals not coming back."

She said several wild cards that could affect housing in 2012 include federal monetary and housing policies, a contentious political climate in an election year, and the unknown strength of the U.S. economic recovery.

At this point, she forecasts gross domestic product growth at 2.6 percent for the year.

Another wrench in the works: fragility in the Eurozone.

"It's hard to tell how much U.S. banks are exposed to European debt risks," cautioned Ms. Appleton-Young.