With favorable interest rates, a first-time homebuyer tax credit and local home prices lower than they have been since the start of the decade, some buyers looking for bargains are slowly returning to the market.
But real estate economists and others tuned in to the industry disagree on whether 2010 will be the year the housing market bounces back.
As the economy tries to climb out of recession, consumer confidence — while up in January for the third consecutive month — remains tentative, job losses continue and California’s budget mess is far from over. Any one of those factors, some experts say, could hinder a recovery.
“We’re not out of this yet,” said Keith Byrd, an agent with Century 21 Hometown Realty who tracks local real estate trends.
Premium content for only $0.99
For the most comprehensive local coverage, subscribe today.
Sales picked up in January compared to the same month a year ago, according to DataQuick, a Southern California-based real estate information firm.
A total of 191 homes — including newly built, resale single-family detached and resale condominiums — sold in the county last month, a 29.1 percent increase from January 2009, when 148 sold.
January sales, however, dropped nearly 36 percent from December 2009.
Byrd noted that there were 195 homes in the county that were pending sales in January compared to 216 in January 2009. That’s a nearly 10 percent drop. For the first 15 days of February, however, the county had 124 pending sales, up from 104 during the same time period last year.
“If this month’s pace keeps up, pending sales activity will take a bump up from last February,’’ he said. “It’s all probably going to equal itself out, and we’ll track close to where we were last year.”
Still, Byrd said higher inventory levels (10 months’ worth in January, the highest level since May 2009), interest rates increasing and the federal first-time homebuyer tax credit expiring are unknowns that put the market in a fragile position. The $8,000 tax credit program applies to eligible buyers who enter into a contract to buy a principal residence on or before April 30 and close on the home by June 30.
An increasing number of foreclosures, he said, could also be a drag on the market. Last year, 2,603 notices of default, the first step in the foreclosure process, were filed, a nearly 39 percent increase from 2008, when 1,877 were recorded, according to data from All-American Foreclosure Service in San Luis Obispo.
A total of 1,088 trustee deeds, marking the final step when the property goes back to the lender, were recorded in 2009, a 14 percent increase from 2008, when 954 were recorded. By contrast, there were only 378 recorded in 2007 and 67 the prior year.
“The good news is we’ve been saved thus far from a big percentage like some other cities and counties have, but the amount we have is causing the values to go down — period,” Byrd said. “We’re almost down to 2002 levels in most cities. The question is, can it drop down much more?”
The all-home median price in January was $366,750, according to DataQuick, a 2.2 percent decrease from the $375,000 median price recorded in the same month a year ago. The all-home median in January fell nearly 6 percent from the December 2009 median, which stood at $390,000.
The median price for new homes in January was $352,500, a 7.2 decrease from $380,000 posted in the same month the previous year. It was also a 36 percent drop from the December 2009 median price of $556,600.
The median price of condos also dipped to $227,000 in January, a 9.6 percent drop from the $251,000 median price in January 2009. Last month’s median sales price was also 2.1 percent lower than the $232,000 recorded in December 2009.
Beacon Economics, the Los Angeles-based firm that presented the county’s 2010 outlook for the UC Santa Barbara Economic Forecast Project, predicted in November that the median home price is expected to drop an additional $45,000, or about 12 percent, by 2011.
Brad Kemp, director of regional research for Beacon, said that prices would then start to return to a reasonable and sustainable growth rate, unlike the
double-digit appreciation seen in the earlier part of the decade.
While some are taking a cautious approach, Mark Schniepp, economist with the California Economic Forecast in Goleta, is optimistic that the county’s housing market is headed for a rebound.
“There are pessimists out there, but we look for this to be a turnaround year,’’ he said. “This will be a much better year for more sales and price stability.”
Schniepp believes the economy will improve and jobs will slowly return this year, which means that consumers will feel more confident about buying property. The first-time homebuyer tax credit, he said, will most likely be extended.
He also said that any resurgence of foreclosures — as banks start releasing them — will not be enough “to derail the housing recovery.”
“We don’t think it’s going to cause a bigger problem for real estate,’’ Schniepp said. “It will work its way through. We see it as the final year of bad homeowner distress. Prices should move higher, and we should start to see more sales.”
The California Association of Realtors also forecasts median prices increasing modestly from the previous year and only a slight decline in sales.
The association forecasts that the median home price in California will rise 3.3 percent to $280,000 this year. That’s compared to a projected median of $271,000 in 2009. Sales are expected to decline 2.3 percent to 527,500 units, down from 540,000 projected in 2009.
Jim Liptak, a Paso Robles Realtor and past president of the association, believes the market has turned a corner. In the county, homes below $400,000 are generating a lot of activity, and anything over $500,000 is still sluggish, he said. There are three-bedroom, two-bath homes in Paso Robles selling for $250,000 or less.
“I think we have hit the bottom in the low end,’’ he said. “The question is how long do we bump along the bottom? You will see a gradual increase in both home sales and median price. But we’re not going to see the unhealthy environment of 2003, 2004 and 2005.”
While the county has not been insulated from the recession, in the longterm it is in a better position than other regions to weather the economic downturn, Liptak said. The unemployment rate continues to be lower than in other counties in the state, and the Central Coast is an attractive place to live, he said.
“Three to five years down the road, I’m very bullish on investment in real estate,’’ he said.
Despite his confident stance, Liptak recognizes that weaknesses remain.
“We will be in a market like this for the next couple of years,’’ he said. “There’s nothing that tells me that we’re going to have a rebound that’s really strong. There are so many economic sectors of the country that are in distress.”