Home sales at 13-year low -- 1 in 5 was in foreclosure

Sonoma County's housing downturn deteriorated in January with home sales hitting a 13-year low and the typical house selling for $500,000, tracking a deeper decline across the Bay Area, according to new sales reports.

Soaring foreclosures have become a critical factor in the county's weakening housing market, adding to a glut of homes for sale and pushing prices lower. In January, 1 in 5 homes sold in Sonoma County was a foreclosure property, about the same rate as the Bay Area region.

"Even at the county level there is a strong correlation between declines in the median sale price and relatively high levels of foreclosures in an area. More foreclosures in a neighborhood means more motivated sellers willing to drop their price," said Andrew LePage, analyst for DataQuick Information Systems, a La Jolla firm that tracks real estate trends.

Sonoma County home prices have fallen 19 consecutive months. Hitting $500,000 in January, the county's median home price has dropped 19.2 percent since the market peaked in summer 2005 and is down 8.3 percent from a year ago, according to The Press Democrat's monthly real estate report prepared by Coldwell Banker.

Despite declining prices, many buyers across the Bay Area are staying on the sidelines. Some are wary of overpaying for houses and others are awaiting potentially lower interest rates under new federal legislation to stimulate the nation's housing sector, analysts said.

167 houses sold in January

January is normally one of the slowest months of the year in real estate, but last month activity slowed to a crawl. Only 167 houses were sold in the county in January, the lowest total since 1995 and well below the historical average for the month. Houses take four months on average to sell, and the supply for sale at the end of January was at a 16-year high.

"There's lots of choices, which is really nice for a buyer. But I know a lot of people who say they just want to wait. I know another person where they've been watching the same house in foreclosure for about six months and now they want to buy," said Sandy Geary, owner of Re/Max North Bay Realty in Rohnert Park. "The fallout is still going on."

Across the Bay Area, sales of all new and existing homes and condominiums fell 41.9 percent in January compared with a year ago, according to DataQuick. Buyers purchased 5,586 homes in January, the lowest in the 20 years DataQuick has tracked the region's housing market.

The nine-county region's median sales price was $550,000, an 8.5 percent drop from the same month last year.

One of the Bay Area's weakest housing pockets has been Sonoma County, trailing only Solano County in the severity of sales and price drops for January. Counties on the region's edge have suffered the steepest falloff because job growth has been weaker than areas near the Bay Area's core, sapping potential buyer demand.

But the downturn has spread throughout the region as foreclosures swell and lenders tighten the money supply on home loans.

A record number of Sonoma County residents lost their homes to foreclosure in 2007. Even more are in danger with default notices also at record levels.

In response, lenders have been tightening once-lax loan standards that helped juice the housing market. What began last spring with subprime borrowers expanded last summer to buyers relying on so-called jumbo loans needed for purchases in much of the Bay Area, including Sonoma County.

"What's clear to us is the credit crunch that struck in August had a sharp and immediate impact on Bay Area sales and median prices. The jumbo loans the Bay Area relies on so dearly got pricier and harder to get, and their use has plummeted," said Marshall Prentice, DataQuick president.

Fewer jumbo loans

In January, jumbo loans accounted for 34.5 percent of Bay Area homes purchases, down from about 63 percent before the credit crunch, according to DataQuick.

Buyers may leave the market if they can't afford a larger down payment to qualify for a less-expensive conforming loan. Such financing falls below the $417,000 limit set by national mortgage companies Freddie Mac and Fannie Mae for purchasing loans from lenders.

Purchasing the typical $500,000 house in Sonoma County with a jumbo loan today likely would cost a buyer about $400 more in monthly mortgage payments compared with a conforming loan, said Maia Lomax, co-owner of Touchstone Financial Group, a Santa Rosa mortgage brokerage. To get the lower loan rate the buyer must make an $83,000 down payment, compared with the more typical $50,000 down payment in a jumbo loan, she said.

"If you have the money and you can do it, this is definitely the time to buy. But you've got to have the money to get a good loan," Lomax said.

Measure raises loan limit

Reducing the cost of loans to purchase and refinance homes is the aim of a measure signed this week by President Bush to temporarily raise the conforming loan limit. The loan level varies by region, but the actual amount for Sonoma County is not clear, Lomax said.

"It adds to the uncertainty," she said.

Prices rose 7.2 percent from December, when the median stood at $466,500. Sales dropped 11.2 percent between December and January. Month-to-month changes are not considered as accurate a barometer of the market's direction as year-over-year comparisons.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.