New Distress Sale Listing Report Shows Similar Percentages, But Far Fewer Actual Distress-Sale Listings

Like the old song says, the more things change, the more they stay the same. At least that’s the case when it comes to comparing our latest Distressed Property Update Report to the one I prepared back in late February.

That’s because the same five cities that led our market area in the percentage of distress-sale listings in Feburary again top the list in the current report. Those ‘honors’ again go to Pittsburg, Antioch, Vallejo, Oakley and Suisun City.

In Pittsburg and Antioch, at least 90% of the active listings were distress-sales (either bank-owned “REO’s” or short sales).  The next three on the list didn’t fare much better, with 82%-85% distress sales.

The region’s highest priced cities (Lamorinda, Alamo and Danville) remained at the opposite end of the spectrum There, less than 20% of the listings are distress sales.

Here in Solano County, after Vallejo’s 85%, the next highest city is Fairfield (68%), followed by Benicia and Vacaville.

Benicia and Vacaville actually swapped places, as Benicia’s percentage climbed from 51% in February to 58% and Vacaville’s dropped dramatically — all the way from 65% to 51%.

While the percentages may be largely the same as what they were in late February, the actual number of distress sale listings is down substantially in those cities with the highest percentages.

That’s due in part to the foreclosure moratoriums that were in place through March. But it’s also due to low interest rates, the first-time homebuyer tax credit, and incredibly low prices — all of which have caused sales to surge in the below-$300,000 price range.

Take Vallejo for example. If you follow our weekly housing inventory report, you know that back in late February there were 796 homes on the market. As of Apr. 27, there were only 462 — that’s a 42% drop in the housing supply in just two months.

To see city-by-city totals for all 19 cities in our Solano and Central/East Contra Costa market area, click here. A few highlights from our custom report:

• Vallejo had the most REO (bank-owned) listings in the region with 172. That’s less than half of Feburary’s total (442).

• In Suisun City, where the housing inventory has dropped by 59% since the first of the year, 82% of its listings are still distress sales.

• The cities with the fewest REOs are Moraga (1), Clayton (3), Lafayette (3), Orinda (4) and Alamo (5).

• The most short sale listings are in Vallejo (219), followed by Antioch (214) , Fairfield-Green Valley (148), Concord (144), Pittsburg (134) and Brentwood (108).

• The cities with the fewest short sales are Moraga (3), Orinda (5), Alamo (11) and Clayton (11).

Our Distressed-Property Report is updated every 6-8 weeks. To  stay current on the market’s activity, be sure to read or subscribe to our weekly Solano County Home Sales & Listings Report, with the latest real estate listing, pending and sales statistics for each city in Solano County.

Coming later this week: How Far Back In Time Have Prices Really Fallen?

Further Reading

• See The Most Recent Weekly Report
• March ‘09 Benicia Home Sales
  
• March ‘09 Vallejo Home Sales
  
• March ‘09 Solano County Home Sales Report
• 1st Quarter ‘09 Housing Statistics
• Fairfield Claims Top Sales Honors For Entire U.S., According To Business Week
• Distressed Sale Listing Report as of Feb. 24, 2009

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These Antioch homes are all more than 2,200 sq. ft. and below $300,000

I’d pull up a property’s history and when they saw that the home they were about to pay $600,000 for had been purchased a dozen years earlier for $210,000, they’d say “if I’d only bought several homes back then when I had the chance.”

The ‘good ‘ol days, were long gone, with prices outpacing rents by such a long shot that any savvy real estate investor didn’t even have to crunch the numbers. Unless they were in it for a quick flip, they knew that the numbers didn’t come close to penciling out when a $550,000 home would only rent for $1,500/month.

No one expected those good ‘ol days to return anytime soon. But thanks to the subprime mess and fire-sale pricing on many bank-owned properties, in some Solano and Contra Costa communities, we’re once again at a point where the numbers are indeed penciling out again.

All you need to do is look in places like Vallejo, Fairfield or Antioch and you’ll find scores of homes in well-kept neighborhoods where current prices are down low enough to where investors are again licking their chops.

In Antioch, for example, right now there are 82 homes on the market below $350,000 which were built in the last 10 years and are at least 2,100 sq. ft. in size (more than half are over 2,500 sq. ft. and an even dozen are at least 3,000 sq. ft.).

Just a few years ago, many of these homes were selling for $600,000-plus. Most of the homes in these upscale neighborhoods are nicely landscaped, well-maintained and located amidst attractive parkways and boulevards. Some have views of rolling hills or the Delta.

And this isn’t just limited to Antioch. In Vallejo, for example, there are 67 homes on the market priced below $400,000 with at least 2,100 sq. ft. In Fairfield, there are 75. And another 24 in Vacaville.

Five years ago, if you wanted to buy something in that price range, you probably were either looking at a major fixer-upper or a small 30-year-old condominium or townhome in a complex that needed some TLC.

When the market finally turns around, homes like these in Antioch, Vallejo, Fairfield, Vacaville or Pittsburg should be well-positioned to attract buyers looking for the latest housing amenities, which could mean huge equity gains for those who recognize the opportunities that exist today.

Let’s say you invested $100,000 in a $300,000 home and were able to rent it out today for about the same as your payments. If prices go up to $350,000 five years from now, that’s a 10% annual return on your investment. If prices go up to $375,000, that’s a 15% annual return – or 75% of your money back within 5 years. Try to find another investment with the potential for such a huge upside.

Now of course, as with any investment, there always are plenty of “ifs.” Perhaps it takes 7 years for prices to go up that high. But then again, maybe it only takes 3 years. Obviously, nothing is for certain, but it only stands to reason that once the huge inventory of bank-owned homes work their way on and off the market, prices should then start moving back in the direction from which they came.

No one knows how fast they’ll go nor how high they’ll go. But it’s hard to imagine that many of these homes won’t be worth at least $400,000-$450,000 within the next 5-7 years. To me those numbers seem very reachable and VERY conservative, too. I wouldn’t be surprised to see some of these homes back in the $500,000s within the next 7-10 years.

And if that happens, as Yogi Berra says, it will be “déjà vu all over again.” Just like those buyers from 2004 and 2005 who bemoaned the opportunity they missed back in the early-to-mid 1990s, when the next housing boom finally arrives, many buyers then will be wishing they’d had the foresight to invest in real estate in 2008 and 2009.

If you ever want to explore the numbers and see what’s really available out there, as long as you don’t already have an agent, give me a call or send me an email and I’ll be happy to pull them up for you.