How's It Going: Housing

If you’re buying or selling a home in 2011, you can expect to see more houses on the market.

You can also expect a higher percentage of those homes to be foreclosures or short sales.

But don’t count on prices rising or banks to start handing out an abundance of loans any time soon.

That’s the conflicting news greeting people in the real estate market as 2011 emerges.

The housing market has been in disarray for more than two years now.  Foreclosures have sprouted across the country with few locales spared.

The Bay Area reported a 5 percent drop in foreclosures last year. Still, there were 51,525 houses in some stage of foreclosure, according to RealtyTrac.com.

In Contra Costa County last month, there were 873 notices of default, the first stage of the foreclosure process. That was a 12 percent drop from November and a 10 percent decrease from December 2009.

On the other hand, federal officials reported last week that 5 million Americans are at least two months behind in their mortgage payments.

Those involved in the real estate market are hopeful 2011 will be better, but they say the volatility of the industry makes recovery an uncertain thing.

“This is as difficult as I’ve seen it,” said Joan Linton, a Realtor with RE/MAX  who has been in the business for 23 years. “It all really depends on where you are.”

For home buyers, the No. 1 obstacle is still financing. Banks have recovered from their 2008 financial meltdown, but they remain cautious in approving loans. Linton doesn’t expect that to change much this year.

“They’re sitting on hordes of money, but they are reluctant to give it out,” she said. “Their criteria is much more difficult. You have to have all your I’s dotted and your T’s crossed.”

Lauren Holloway, a realtor with Sotheby’s International Realty in the San Ramon Valley, is slightly more optimistic. She expect banks to loosen up on the money supply as the year unfolds. However, she said they still will have tight requirements.

“It won’t be like a few years ago when they just checked to see if you had a beating heart,” Holloway said.

Another problem for home buyers is inventory. There are still a low number of homes on the market, so the selection is limited.

Both Holloway and Linton expect the supply to increase as 2011 progresses.  Part of the reason will be banks starting to put foreclosed homes on the market. Another will be home sellers and buyers feeling a little more confident.

Linton said the Bay Area is still a desirable place to live, especially for people who live out of state.

“It’s still a draw. People still want to move here,” she said.

Holloway said she expects neighborhoods of western Danville and Alamo to do well.

“That just goes back to that old saying—location, location, location,” she said.

Interest rates are expected to rise during the year, but home prices are less certain.  Holloway predicts a slight increase, while Linton believes they will remain about the same.

For the most part, that is good news for home buyers.  They can purchase a nice house for a price well below what it was valued three years ago.

However, the basement prices can also instill unrealistic expectations for prospective home owners.

“The beauty is in the eye of the beholder. Prices are all over the place,” said Linton. “Everybody is looking for a deal because of the gloom and doom they see in the media.”

Prices, on the other hand, can be a major obstacle for home sellers. 

Some are "under water," meaning that they owe more on their home than what they have in equity. Others simply can't get enough out of their house to buy a decent home to move into.

Linton said people used to sell their home when they wanted an extra bathroom or if they wanted to live in a different neighborhood.

"I don't think people will be moving for the heck of it," she said.

The lack of bank loans is a problem for home sellers, too. You can't sell your house if the buyer can't get approval from a lending institution.

Linton said she recently sold a home in eastern Walnut Creek that had been on the market since summer. The first potential buyer in August got cold feet. Then, in the fall, a second buyer couldn't sell their house.

Finally, last week a couple who was renting in Berkeley purchased the home for less than $800,000, more than $30,000 less than it was listed for during the summer.

"How many times can you sell the same house?" Linton asked.

Knowledge in the housing market is a key to making smart decisions.

The Tri-Valley Housing Opportunity Center in Dublin holds seminars every month for potential home buyers.

Milly Seibel, the organization's executive director, teaches classes that focus on credit, loans, the home buying process and other important information.

"It really helps to understand," she said.

Seibel does see the real estate market picking up again in 2011.

"I think homeowners are feeling more comfortable and are ready to move on," she said. "They feel like they're not trapped in their homes anymore."

Two people in her class at the Dublin library were cautiously optimistic.

Samantha Godsoe, 22, and her 26-year-old boyfriend live in separate homes in Livermore. They are thinking of buying a place together.

Godsoe said she's a little overwhelmed at all the details and a bit shocked by home prices, even though they are at record lows. However, she and her boyfriend are feeling better about the market.

"We're not in a hurry, which is a nice thing," she said.

Kevin Heller, a teacher at Ohlone College, rents a place in Pleasanton and would like to become a homeowner.

He sees an expanding selection of houses, reasonably affordable prices and low interest rates.

"My impression is this is a great time to buy a house," Heller said.