Sacramento region’s repossessed home sales boom hits lull
ShareThisBy Jim Wasserman
Published: Saturday, Apr. 18, 2009 - 12:00 am | Page 1B
Months of foreclosure moratoriums, stepped-up loan modifications and bank decisions to keep repossessed homes off the market are biting hard into a slice of the economy that has come to depend on sales of distressed homes.
Sacramento-area real estate agents who sell bank-owned homes and the contractors who fix them before and after sales say business has slowed 30 percent to 50 percent since late last year. The lull, following a yearlong burst of foreclosure sales, coincides with a recent shift by banks to slow the stream of repossessed homes to market.
That’s not expected to last. But the lull has dampened incomes in an entire niche industry tied to selling bank-repossessed homes.
"There’s definitely a trickle-down effect on everybody," said Carey Covey, a Cook Realty agent who specializes in listing homes foreclosed by banks.
Warren Adams, a Security Pacific Real Estate broker and another specialist in bank-owned listings, said his own business is off by "practically half" in recent months.
"It’s impacted every one of the little fingers that go off repossessed houses," Adams said. "That’s landscapers, contractors, house cleaners, trash haulers. A lot of people have reduced staff and employees as a result of that."
John Kukis owns Sacramento-based Kukis Home Repair. He does basic fix-ups for repossessed homes – typically to $10,000 – to get them in shape for banks to sell.
"We’ve slowed down maybe 30 percent since the beginning of the year," Kukis said.
But he calls the lull a welcome breather after a year that saw about 23,500 foreclosures in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.
The slowdown in business can be seen in the most recent figures about the number of foreclosed homes on the market.
According to Sacramento-based Lyon Real Estate, there is only about a one-month supply of repossessed homes for sale in El Dorado, Placer, Sacramento and Yolo counties. That means it would take roughly 30 days or so to sell them all at current sales paces.
A little more than a year ago, it would have taken buyers nearly five months to snap up all the repossessed homes on the market.
In the first three months of the year, the share of bank-owned homes sold in Sacramento County has declined, researcher MDA DataQuick reported Thursday. Repossessed homes accounted for 66 percent of sales in March compared to a high of 71 percent in January.
With the spring sales season heating up, many real estate agents say there are more buyers in the market than repossessed homes.
"The stuff under $200,000 is just selling, getting multiple offers," said Adams, the Security Pacific agent. He said low prices and historic low interest rates assure that the buyers will be there when the supply inevitably begins to expand again.
"Lenders have indicated this is going to change," he said. "I’d say easily in the next 30 days we’ll start to see an increase based on rising defaults and foreclosures."
Changes in the market began late last fall. Starting in November as the holidays neared, numerous banks, as well as federal mortgage giants Freddie Mac and Fannie Mae, announced foreclosure moratoriums that would extend well into 2009.
"We started to see it (business) dying off about mid-December," said Phillip Connell, president of Connell Construction.
The Sacramento-based contractor repairs bank-owned homes throughout one of the top U.S. foreclosure belts: Merced, Modesto, Stockton, Sacramento and other cities north of the capital.
Many of those lender moratoriums appear to have now ended.
"We’re expecting it to ramp back up again," Connell said. "That’s what the banks are telling us."
Lenders have also held some of their already foreclosed properties off the market, creating a so-called "shadow inventory" that doesn’t show up in statistics.
"I’ve been told banks are holding them, waiting for some of these government programs to kick in," said Covey, the real estate agent. "There will be more buyers to scoop them up."
Among those programs: an $8,000 federal tax credit for first-time buyers, the principal market for bank-repossessed homes.