Special Reports

Top story of 2007: Mortgage crisis hits SLO County housing hard

Mike Melvin bought his Atascadero home with 100 percent financing and an adjustable rate mortgage. He is now facing foreclosure and trying to negotiate with his lender. Photo by Joe Johnston 4-16-08
Mike Melvin bought his Atascadero home with 100 percent financing and an adjustable rate mortgage. He is now facing foreclosure and trying to negotiate with his lender. Photo by Joe Johnston 4-16-08

Editor's note: Here is the story Tribune staff chose as the biggest story of the year in 2007. The article, originally published on Dec. 31, 2007, is reprinted below.

San Luis Obispo County's housing market continued its rough ride in 2007, a year punctuated by slower home sales, falling prices and greater choice for potential buyers as inventories crept up.

Home sales in the county from Jan. 1 through Dec. 27 slipped 12 percent from the same period a year ago, according to data from the Central Coast Regional Multiple Listing Service. The data includes existing, single-family homes, condominiums and planned-unit developments.

The biggest drop occurred in the North County and the North Coast, where sales declined 25 percent and 11.9 percent respectively, from the previous year. Sales in the South County slid 3.5 percent, while the city of San Luis Obispo had sales gains of 9.3 percent.

Median prices in cities throughout the county also declined during this period. The city of San Luis Obispo's median price had the greatest drop at $570,000, a nearly 11 percent decline from the previous year when the median was $640,000. The North County median, meanwhile, declined to $469,000 from $490,000, a 4.3 percent decrease.

In December, the county median was $472,500, down from $529,000 the same month a year ago.

"If you stand back and look at the market, there's still job growth, attractive interest rates and unemployment is low," said Jim Liptak of Country Real Estate in Paso Robles and president-elect of the California Association of Realtors. "But you're still seeing great difficulty in the market, a lot of it caused by the (subprime) mortgage crisis."

Liptak said the housing slump actually started in 2005, the same time record numbers of people jumped into real estate. The oversupply of housing and agents were two things that "created almost the perfect storm."

"This is an interesting market to be sure," Liptak said. "Right now, the number of (annual) transactions an agent is doing in California is on average under four. In 2004-05, that figure was 12 to 14. We're above the average for agents in terms of sales, but it's not easy. It's never easy because the market is constantly changing."

Slow recovery

There will likely be more bumps ahead as the housing market stabilizes, economists say.

Kirk Lesh, real estate economist with the UCSB Economic Forecast Project, said the housing market would not improve until the end of 2008.

"Hopefully, by 2009 we will see things turning in the right direction," he said. "We will start to see sales pick up and prices will gradually increase (the forecast calls for a 3.2 percent decline in the single-family home median price next year). But it's going to be a slow change. It's not going to be this explosion."

There will be winners and losers in the next year, he said.

Renters, for instance, may find that it's just as costly to rent than to buy, spurring some people to jump into the market, he said.

"Of course, on the other side of the coin, if you wanted to sell a home now and move, you may not get as much money as you wanted. For each person, it's going to be different."

Boon for buyers

While the news is sobering, some local real estate agents say there's reason for optimism.

Becky Adams, an agent with Coldwell Banker Don Bricker Real Estate in Cambria, said properties that are priced aggressively are selling.

"There are buyers markets, and there are sellers markets, and this happens to be a buyers market," said Adams, who said she's seeing her best year ever in terms of sales and that she's selling to second-home buyers and retirees. "The coming 12 months will be the best time to buy."

Dick Keenan of The Keenan Carter Group at Keller Williams Realty in Pismo Beach believes that now is the right time for real estate investors to jump on foreclosed properties, which have increased in the county this past year.

The group has shuttled potential homebuyers to bank-owned properties in San Luis Obispo and northern Santa Barbara counties.

"We're seeing a few investors get off the fence, and that's a good sign," Keenan said.

Still, he acknowledged that the county's housing market is in transition.

"Values have declined substantially. Whether we're at the bottom right now, I'm not sure. But we're trying to identify the good opportunities."

Liptak of Country Real Estate said some people are still waiting for home prices to drop further before they jump in, but the phones are starting to ring.

"The long-term outlook for making an investment in real estate in California is excellent, especially in our area," he said. "This is a beautiful place and people want to move here. People (in recent years) were treating buying a home like buying stock, but you have to look at it like buying shelter."