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Hope in the California Housing Market – Lower prices, Interest Rates Equal Opportunity for Buyers

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By Jenny Shearer

RISMEDIA, February 3, 2009-(MCT)-Guadalupe and Ariana Sanchez represent hope in the housing market. The 28-year-old couple with four children just bought their first home.

“We got it pretty cheap. Right now is the best time to buy,” said Guadalupe Sanchez, a carpenter.

Sanchez toured 20 homes, bid on four, and landed a deal with a three-bedroom, two-bath house on Sherman Avenue in southwest, Bakersfield, California for $160,000.

“I told my wife, we’re just throwing our money away by renting. Let’s try to get a house,” he said.

Low home prices and low interest rates-coupled with inventory agents say that they’re quickly moving-are positive news for Bakersfield’s real estate market.

For example, Ken Carter, president of Watson Touchstone ERA, said his agents sold 241 homes in December, a 56% increase from the 154 transactions in December 2007.

About half of the 241 sales were foreclosures, Carter said.

Bakersfield has “a big pile of properties that we have to work through, those properties that are in some state of default,” Carter said, adding the market “can’t be in great health until we work through those. The good news is we’re working through those at a record pace.”

Homes are moving every day, and buyers have choices. Friday morning, for example, 3,636 properties in Kern County-single-family homes, condos, mobile and manufactured-were marketed on the Multiple Listing Service, according to the Bakersfield Association of Realtors. Of those 3,636, there were 1,402 bank-owned properties and 1,126 were short sales, in which a lender accepts offers that are less than what a home is worth.

A Time for Investors

Real estate investor Mike Pope took a hiatus from buying in 2006 but returned to it last June. He looks for homes with solid structures in neighborhoods that could benefit from revitalization.

In June, he paid about $110,000 for a home on Teresa Court, near Pacheco Road and Hughes Lane, that last sold for $235,000 in 2005.

“It had graffiti inside and outside you would not believe,” Pope, 55, said of the bank-owned house that needed new doors and windows.

Here’s what Pope did: He spent $23,000 on materials for improvements and did most of the work himself. He has a tenant who wants to buy the house for about $180,000.

“My biggest reward on the one on Teresa (Court) is getting to know the neighbors. They would keep an eye on the house; I would have them over to see the progress,” said Pope, who is on medical disability from a teaching job.

The Cycles of Real Estate

Those ready to buy may even be outbid on good buys as home prices approach pre-boom levels.

“What we have found in the association is that many of our membership are saying they’re having a competitive bidding scenario again on some of these homes that are coming into the inventory … that are REOs,” said Nance Fillmore of Fillmore Realty and Financial Services. She’s the president of the local Realtors Association.

Real estate experiences peak-trough cycles that take about eight years to 10 years to complete, said Mark Carrington, director of sales and support for First American CoreLogic, a Santa Ana-based real estate data firm.

It typically takes three years to four years for home values to decline, and six to seven for them to increase.

Home values peaked in July 2006, and “’07, ’08 and ’09 is the drop,” Carrington said.

“So far right now, we’re acting just like any other cycle has happened. It’s a deeper, steeper drop than we’ve experienced in a long time, (but) the timeframe is pretty average so far.”

Prices are down now, a benefit for buyers.

“That is of course an effect of the foreclosed properties that are pervasive in our market,” Fillmore said. “If the homeowners can ride out this period of time, it will go back to a normal appreciation that we’ve experienced for many, many years in the past.”

What About Current Owners?

Certainly, some homeowners were in over their heads, or got there after a job loss or illness.

“A person loses his or her home because some type of trigger happens that is overwhelming,” Carrington said.

Fillmore urges those who have trouble making payments to consult their lenders and take advantage of programs such as the federal government’s Hope for Homeowners.

Last year, Warren Ash, broker at Bakersfield Realty Group, handled about 330 bank-owned properties.

“I’ve been told by more than one company to expect my inventory from that company to double or even triple in 2009,” he said.

The industry is also watching the impact of option adjustable-rate mortgages, popular from 2003-06, which allowed borrowers to make minimum payments, paying less than both the principal and the interest that was owed. Homeowners could choose to make small, medium or large payments.

It seemed like a great idea when home values kept increasing.

“That five-year period for most of those loans is going to peak in 2010,” Carrington said, adding modifications and refinancing may be available to help some folks keep their homes.

Copyright © 2009, The Bakersfield Californian
Distributed by McClatchy-Tribune Information Services.

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