Home prices slide further

By: CHRIS BAGLEY - Staff Writer | Thursday, September 13, 2007 12:29 AM PDT ∞

Riverside County's real estate market remains stuck in its deepest downturn in a decade, a research firm reported Wednesday, though agents said a handful of clear-eyed sellers have been able to keep things moving.

Just 2,834 homes sold last month in the county, a slight rebound from an eight-year low recorded in July, according to DataQuick Information Systems. The median sale price was about $394,500, down 6 percent from August 2006.

The median -- which represents the midpoint of the market for any given month -- peaked at $432,000 in December, and has slid more or less steadily since then. Driving that trend is a growing wave of sellers who are becoming willing to compromise. Several real estate agents interviewed Wednesday said clients received offers a couple of weeks after reducing their asking prices.

"They're a lot more reasonable," said Erenie Fortney, whose clients sold their 2,500-square-foot Canyon Hills home for $355,000 after a series of reductions from $419,000. "Two years ago, they'd think that if it's beautiful, people will come in and look. They're not doing that anymore. They're looking at price."

Mortgage rates fell sharply in 2002, sparking home-buying frenzies in Southwest County and other areas of the nation that had been considered out of commuting distance from major job centers. The average price of existing houses in Southwest County doubled from $251,000 in May 2002 to just above $500,000 in May 2006.

Meanwhile, economists had begun to warn that such prices were far out of line with incomes in Southern California, setting them up for a fall. That has happened, and some economists have warned that prices in the region would have to fall another 10 percent before beginning to recover some time next year.

The average price of existing houses in Southwest County slid to $443,400 last month, according to The Californian's analysis of figures from a database used by local real estate agents.

"People don't want to lower their prices, especially if they can keep their houses," local agent Marilyn Haden said. "But most (buyers) want to negotiate, so you bring it to the point where they can negotiate."

Haden listed a 1,500-square-foot French Valley house for $384,000 in early June. Her clients shaved $4,000 off that price in early July. A man made an offer within three weeks and bought the house for $361,000 in late August.

The house was actively listed for eight weeks, a typical length of time for recent sales. Earlier this year, local houses were taking an average of 11 weeks to sell, according to the agents' database. Several agents have said the quicker sales are the result of sellers deciding not to hold out for top dollar.

"They're thinking 'All right, maybe I want to be ahead of the curve instead of chasing the curve,'" agent Vicki Carpenter said.

One couple whom Carpenter is representing put their Canyon Hills home on the market for $490,000 in February and has since reduced its price to $460,000 and then to $420,000.

But the lower price has not drawn the attention of many would-be buyers. Even those who would agree to the price cannot get the financing that was so readily available a year ago, Carpenter said.

Eventually, the couple might have to consider further reductions, renting out the house and other options, she said.

Sellers are increasingly having to compete with lenders that have seized houses from delinquent borrowers. In the Murrieta area's two ZIP codes, for example, 493 -- nearly a quarter -- of the houses listed for sale are owned by banks, according to foreclosureradar.com, a database used by real estate brokers and investors.

By definition, lending institutions are in the business of money, not real estate, and are loath to keep houses on their books for more than a few weeks. That has helped to drive down prices significantly, and could undercut the market further if homeowners continue to default on their loans faster than Southern California's economy brings in new home buyers.

Foreclosures have a bright side for those buyers, said Diane Vaughn, an agent with Oak Tree Realty Group.

A couple represented by Vaughn made an offer on a 2,900-square-foot bank-owned house in Wildomar in late May, a couple of weeks after the bank reduced its price to $475,000 from $495,000. They closed on the house early last month for $445,000. Meanwhile, she said, they cut the asking price of their Murrieta house to $425,000 from $449,000 earlier this year and got multiple offers within a few days. Having lived in the house for several years, they made a huge gain on the $418,000 sale, she said.

It was a nice turn of events for Vaughn's clients, though she said she also recognized the effect that the recent proliferation of bank-owned properties can have on other would-be sellers.

"I feel badly for these people," she said.

Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or cbagley@californian.com.