STOCKTON, California - In some areas of
California, so many foreclosed homes are available to buy on the cheap
that real estate agents are discouraging prospective sellers from even
putting their houses on the market.
Perhaps
the most extreme example of this is Stockton, about 85 miles east of
San Francisco, where roughly three of every four homes for sale are in
or on the path to foreclosure.
The city's resale market is "pretty much gone," said Cameron Pannabecker, owner of Cal-Pro Mortgage Inc.
"I don't know an agent today who would take
your listing unless you're a hard-luck case. There is just too much
competition," Pannabecker said. Properties that at the peak of the
market two years ago were selling at $500,000, or appraised at
$500,000, are now selling for $200,000, he said.
And
because foreclosures dot all areas of Stockton, buyers have their pick
of properties, said John Knight, a professor of finance and real estate
at Stockton's University of the Pacific Eberhardt School of Business.
"Honestly, there isn't a huge amount of difference between a foreclosed
home and a regular home than the prices," Knight said.
Worse
for people trying to sell their homes, lenders in possession of houses
and condominiums may keep their fire-sale in full swing for months to
come to attract investors to a market near the top of U.S. surveys of
areas hit by foreclosures.
"It's
a tough market to be a normal seller," said Stockton real estate agent
Michael Blower of Blower Realtors. "I'll really ask them, 'Do you need
to sell?' Because your competition are banks who want to clean it off
their books."
Calling
up listings on a database, Blower noted just over 3,500 of nearly 5,000
local homes listed for sale are in some stage of foreclosure. "There
are more listings coming," he added.
More
listings would add pressure on local home prices. But they may only
hold prices down rather than drag them lower because investors are
slowly coming to Stockton in search of bargains, and in some cases they
are in bidding wars, albeit at comparatively low prices.
"We
heard yesterday there were 36 offers on one house," said Terry Hull
Sr., a veteran Stockton property manager and owner of property
management company W.T. Hull Co Inc.
Hull
said he, too, may soon put offers on local properties because they have
become so cheap: "We're going to buy about 50 houses because we know
it's an opportunity you rarely see."
Stockton's
home prices surged earlier this decade amid a building boom seizing on
skyrocketing prices in the San Francisco Bay area displacing
middle-class buyers.
Many
headed to Stockton, historically a sleepy agricultural distribution
center, and neighboring towns more than hour's driving commute east.
Routine home financing, as in many other markets, was in the form of
risky adjustable-rate mortgages.
When
low interest rates reset, many of those mortgages became too expensive
to maintain, triggering a wave of defaults and foreclosures.
Distressed
borrowers who manage to sell their houses are in many cases able to
rent equivalent properties for about half the cost of their monthly
mortgage payments. "I don't know of anybody who has been foreclosed who
is moving into an apartment," said Paul Jacobson, an associate at W.T.
Hull Co.
Investors
have taken notice that rental demand in Stockton is on the upswing
while home prices have fallen, providing an opportunity to turn
foreclosures into profits, said Cesar Dias, a Stockton real estate
agent who arranges bus tours of foreclosed properties.
Dias said one foreclosed home he showed last
month sold for $80,000, or $11,000 above its asking price, after 12
days on the market. The two-bedroom, one-bathroom house may rent for up
to $1,000 a month and generate a monthly profit of up to $400.
Investors
likewise pounced on a three-bedroom, three-bathroom home in a gated
subdivision that Dias just showed. It has at least three offers at its
$220,000 asking price, he said. "People are cherry-picking and finding
the right ones," Dias said. "They see prices are at a bottom."
"Do I see the tide turning? Yes," Dias added.
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