Foreclosures have been one of the key drivers of San Luis Obispo County home sales this year as first-time buyers and investors continue to look for bargains.
About 39 percent of all residential home sales in the first quarter were distressed properties, which include bank-owned homes and short sales, according to recent data from RealtyTrac, a real estate website that tracks nationwide foreclosure data. (A short sale occurs when the lender allows the property to be sold for less than what is owed on the mortgage.)
The percentage of foreclosure sales is certainly better than the statewide average of 51 percent.
And it has declined from the same period a year ago when it was 50 percent. But it’s still a dramatic shift from four years ago, when foreclosure sales accounted for less than 1 percent of all county sales.
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Daren Blomquist, director of marketing communications for RealtyTrac, thinks California won’t clear the inventory of foreclosures that have built up — and that will continue to build up — until the end of 2011.
“We’re in for an extended period of time when foreclosure sales are a high percentage of all sales,” he said. The market nationwide and in California is “pretty much dominated by foreclosures,” as banks steadily release more distressed properties for sale, he said.
These properties are putting downward pressure on overall market prices, local real estate agents say.Buyers can often get a substantial discount on a distressed property.
In San Luis Obispo County, there was a 16 percent difference in average sales price between foreclosure and nonforeclosure properties in the first quarter, which means distressed property buyers received a 16 percent discount, according to RealtyTrac. Dick Keenan, broker and principal with Pismo Beach-based Keenan-Carter Group/Keller Williams Realty Central Coast, said foreclosed properties are attractive to first-time buyers and investors, some of whom will pay cash for the home, fix it up and resell it. He has one such property that can’t qualify for conventional financing in its current condition, so he’s priced it to attract an investor. Some short sales, Keenan said, are also causing prices to become more competitive as sellers “have to price them at or below the REOs (actively bank-owned properties) just to generate offers.” Lower-priced homes — about $350,000 and under — are seeing the most activity in the North County, said Andrea Steinbeck, president of the Paso Robles Association of Realtors. A sizable chunk of homes in the lower price ranges are in some type of distress, which means they are bank-owned, have had a notice of default filed or are on the market as a short sale.
Currently, about 29 percent of available properties in the North County are distressed, she said. From January to July 1, 52 percent of all residential property sold in the North County was distressed.“We will have them (distressed properties) in our market for the rest of this year and probably into 2011 as well,” Steinbeck said. Steinbeck cautioned buyers, however, to look at all properties, not just those in distress.
“The perception is that foreclosure properties are the best deal,” she said. “I try to educate clients that every person selling their home right now, whether a foreclosure or not, has to compete with the pricing.”
The median price of county homes was $360,000 in May, down nearly 3 percent from the May 2009 median of $370,000, according to DataQuick, a Southern California-based real estate tracking firm.
Blomquist of RealtyTrac said foreclosure sales are a sign that the market continues to move forward. “They’re getting (distressed properties) into the hands of homeowners who can afford them, and who will probably improve the value of these properties,” he said.