Bargains push bay home sales, but prices plunge

(10-21) 13:37 PDT SAN FRANCISCO -- Bay Area home sales marked their biggest gain in at least two decades last month, but the price plunge set a record, too, as buyers snatched up bargains in the communities hardest hit by foreclosures.

A total of 5,449 existing single-family homes traded hands in the nine-county region in September, up 74.8 percent from a year ago, according to MDA DataQuick. The median price was $400,000, down 40.3 percent from September 2007. Those are the largest year-over-year gains and drops, respectively, in the San Diego research firm's 20 years of data.

The median was dragged down in large part by the changing mix of sales, DataQuick said. More homes that moved are lower priced because it's harder to obtain loans for expensive properties, and there are more deals to be had in the less-expensive inland markets. Contra Costa, Napa, Sonoma and Solano counties accounted for almost 62 percent of all Bay Area home sales, and nearly 42 percent of all the homes that traded hands across the region had been foreclosed on within the past year.

Given that, the regional median does not accurately reflect conditions in areas that haven't seen high foreclosure numbers, industry observers say. In San Francisco, prices were off just 14.1 percent and sales were up 1.3 percent.

"Buyers are most active in the inland market where prices have come down the most and foreclosures are most common," DataQuick analyst Andrew LePage said. "I think it's fair to say there's a massive (sales) recovery under way in those areas, though there's still no evidence that prices have firmed up."

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, took exception to the use of the word recovery in any sense.

"These numbers show a very weak housing market, not a recovering housing market," Rosen said. "It's a buyer's market without question in almost every part of the Bay Area."

He believes that results will be weaker still for October, as the economic upheaval and screaming financial headlines of the past six weeks have made people more reluctant to buy even as the rocked credit markets have made it more difficult to get financing. Rosen has revised his predictions for the local real estate market downward based on the recent market news, saying prices will now fall an additional 4 to 5 percent, or as much as 20 percent total even in the core areas of the region.

The brisk activity in distressed areas is "encouraging" because it will eventually translate into stable and even rising prices, said Rick Turley, president of Coldwell Banker's San Francisco region.

"The bad thing would be to see the median price down 36 percent and sales down 36 percent," he said.

Rob Chrisman, director of capital markets for Residential Pacific Mortgage in Walnut Creek, said more people are buying in outlying regions because there's a growing sense that prices may be approaching a bottom. Despite the seize up of global credit markets in recent weeks, he and Turley both said that qualified borrowers with money to put down continue to be able to secure home loans.

"There is no loosening of mortgage credit right now, but it has been stable, it has not been worsening," Chrisman said.

James Temple, Chronicle Staff Writer
Wednesday, October 22, 2008