February Sales

February was a cold wet month for county home sales. It was a good month for Presidential Birthdays but there was nothing to celebrate about the real estate market during the short month. The El Dorado County Board of Realtors reported only 109 closed residential sales. It was the slowest sales month since January of 1997. Our best February was in 2005 with nearly twice the monthly sales at 195 sales. This last month was the slowest. The median selling price of a county home, however, seems to be holding.

The $495,000 median selling price was 13 percent higher than February of 2006 and 10 percent higher than January of this year. Lifting the median price were 15 home sales in excess of $750,000 and nine of the 15 home sales were over a million dollars. The most popular price brackets, however, with 12 sales in each were between $400,000- $450,000 and $500,000-$550,000.

Too many homes available for the number of buyers continues to depress our real estate market. An evenly balanced market between buyers and sellers has been commonly defined by a six-month supply of housing inventory. During February of 2005 we had a four-month supply of available listings. This last month, available inventory has grown to over a years supply. There are currently 1,350 homes for sale in the county, more than this time last year.

El Dorado Hills leads the county in the number of listings at 423 and the number of monthly sales at 45. The area accounted for thirty-one percent of all county homes listed and forty-one percent of all sales. While the average price of $705,500 was nearly the same from a year ago the number of monthly sales jumped by a third.

Cameron Park, with 156 homes for sale, reported only 12 sales, half as many as in February of 2006 but the average cumulative price of $464,500 was $23,000 higher. The greater Placerville area has 135 homes on the market, 11sold in February for an average price of $346,000. El Dorado/Diamond Springs currently has 70 homes for sale. Of the seven that sold last month, 4 were over $700,000 pushing the average selling price to $637,000. Pollock Pines/Sly Park has 117 homes listed, 9 sold last month for an average price of $343,500.

Of the 85 homes for sale in Georgetown, Garden Valley and Greenwood only 5 closed escrow last month. The average price of $338,500 was a declined of $12,000 from a year ago. Cool/Pilot Hill has 65 homes for sale, only 2 closed escrow with an average price of $438,000.

The current debate among industry professionals centers around how long county home prices can hold or continue to increase, in light of weak sales activity. Would sales increase if prices declined or would the general market malaise continue regardless of more affordable homes? Higher-end homebuyers don’t appear to be hesitating on making a home buying decision. Since the first of the year, 15 percent of all home sales were in excess of $700,000.

Spring can’t come soon enough for the 1,000 Realtor members of the local Board. Membership has declined by 200 since December. There are now nine times as many Realtors as there are home sales.

With a record number of homes to chooses from, interest rates around six percent and sellers willing to deal, one would think that home buyers would recognize the opportunity not previously available since 1999. Nope, not during the month of February.

What about FHA?

A hearing on Capitol Hill last Thursday focused attention on one of the key solutions for home buyers and refinancers squeezed out of the subprime market: FHA's insured loan programs, which typically offer lower interest rates, low downpayments, generous underwriting and superior consumer protections compared with subprime.

The hearing was on legislative efforts now underway to raise FHA's mortgage maximums to the same levels as Fannie Mae's and Freddie Mac's in high cost areas-currently $417,000-and to give the agency new powers to compete more effectively with private subprime lenders.
FHA offers a lot to credit-impaired consumers that they can't find in the private marketplace-the agency never charges prepayment penalties, as just one example-yet it has gradually lost its once dominant position and slipped to a 3 to 4 percent share of the total market in recent years. Meanwhile, subprime lenders-fueled with Wall Street mortgage bond money and hefty fees-have grown steadily to control anywhere from 15 to 20 percent of the total market, according to industry estimates.

Subprime lenders boomed from 2000 to 2006 by offering loan concepts FHA could not-or would not-touch: nothing down, no income or asset verification, payment option, balloon payment, piggyback first and second liens, interest only and "2/28" adjustables.
Now growing numbers of people who bought houses using these subprime techniques are facing payment resets, and zero or negative equity positions. Their high delinquency rates have triggered the meltdown in the subprime space, with dozens of companies leaving the business, and sharply restricting new loans.

FHA, which offers 3 percent downpayments and rates averaging 3 percentage points below subprime competitors, developed the reputation of being slow, bureaucratic and overly protective of consumers during the same time subprime companies were expanding their operations. Worse yet, in high cost areas such as California, FHA's $363,000 loan ceiling was too low to handle even first-time buyers.

But now the situation has changed radically: Subprime wholesalers are on the ropes, ratcheting up underwriting standards, scaling back loan programs or simply going out of business. Their home buyer customers need a resource to turn to, and many subprime home owners need a place to refinance.

The good news, industry officials say, is that in the past two years, FHA has rid itself of many of the bureaucratic hang-ups that one plagued it, and loosened up its overly protective requirements on appraisals and mandatory fixups of properties prior to sale. Perhaps more important, they add: FHA is not subject to financing cutbacks from Wall Street that are now slamming doors on subprime borrowers. Its bonds are all backed by the federal government, so unlike the collapsing subprime capital arena, there's plenty of money for FHA-insured home buyers and refinancers.

Where are the forclosures?

Nevada replaced Colorado as the state with the highest foreclosure rate thanks to an 8 percent increase in foreclosure filings from the previous month and a slight decrease in Colorado foreclosure filings. The state reported 2,397 new foreclosure filings during the month, a foreclosure rate of one new foreclosure filing for every 362 households — 2.4 times the national average.

A 70 percent increase in foreclosure activity propelled Michigan’s foreclosure rate to second highest among the states. The state reported 11,554 new foreclosure filings, a foreclosure rate of one new foreclosure filing for every 366 households. The state’s foreclosure total was the fourth highest reported by any state and more than twice the number reported in January 2006.
Georgia’s foreclosure rate — one new foreclosure filing for every 372 households — ranked third highest among the states for the fourth month in a row. The state reported 8,328 new foreclosure filings during the month, up 29 percent from the previous month and up 13 percent from January 2006.

Colorado’s foreclosure rate dropped to fourth highest for the month after claiming the top spot in nine out of 12 months in 2006. Other states with foreclosure rates among the nation’s 10 highest included Arizona, Texas, Ohio, Florida, Illinois and New Jersey.