Foreclosures helped fuel the sharpest decline in California housing prices in at least 20 years last month, and that’s attracting an influx of first-time buyers who had been priced out of the market or were waiting for prices to bottom out.
The median home price in California plunged 30% to $339,000 in May, the steepest decline for any month going back to 1988, when DataQuick Information Systems began keeping records.
Home buyers are now seeing median prices they haven’t seen since February 2004, when the price was $322,500, the firm said Wednesday. The statewide median home price, the point at which half the homes sold for more and half for less, peaked at $484,000 in May 2007.
“All of a sudden, [homes] are in our price range,” said Elizabeth Trezza, a paralegal in Oakland.
Trezza has been on the hunt for a foreclosed property and placed offers on at least six in recent weeks.
The 24-year-old made an offer Tuesday on a two-bedroom, two-bath bank-owned home in Oakland listed at $234,000 -- just below her maximum spending limit, $250,000.
“Right now our mortgage would be relatively close to what we pay for in rent,” she said.
For California, epicenter of the nation’s housing boom and bust, the drop in home prices has sparked a home-buying rally that’s beginning to reverse more than two years of monthly year-over-year sales declines.
Though observers are cautious to call the surge in foreclosure sales a bellwether for a wider turnaround, it suggests some buyers are feeling less skittish about diving back into the market.
“Inland markets hit hardest by foreclosures and falling prices are now the most likely to post higher sales than last year,” said Andrew LePage, a DataQuick analyst. “These communities have been attracting first-time buyers, first-time move-up buyers and investors.”
Prices in those markets are now more in line with family incomes, and some buyers feel they are getting better deals, LePage said.
Sue Ansel, chief operating officer of Gables Residential, a luxury apartment rentals operator, says she has seen an uptick this year in renters moving out to become homeowners.
DataQuick said a total of 33,024 homes were sold statewide in May, down nearly 11% from a year earlier. About 38% of the resold homes in May were foreclosed properties.
Some foreclosure hunters are finding themselves having to bid against rival buyers on properties, said Richard Cosner, president of Prudential California Realty.
“Homes that are $200,000 to $250,000 today were $400,000 18 months ago,” Cosner said. “For the first-time home buyers and for that bottom tier of homes, we’ve found what the bottom of the pricing is.”
Homes priced below $400,000 drove the surge in sales. Many were financed with loans backed by the Federal Housing Administration, mortgage brokers say.
“FHA financing has really skyrocketed,” said Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn.
Sales, on the other hand, were weakest in many higher-end coastal markets, where there are fewer foreclosed homes and sellers are more reluctant to cut prices.
In San Francisco, for example, foreclosures made up only 5.8% of resold homes. The median home price there slipped 5.4% to $790,000 last month.
In contrast, more than half of all resold homes last month in nearby Solano County were foreclosed properties, DataQuick said.
That helped drive the median home price down by about 30% to $300,000 compared with May last year.