Bay Area homes sales sank to a two-decade low in September, as tighter lending standards walloped an already-declining market.

A total of 3,118 existing single-family homes changed hands in the nine-county Bay Area in September, down 44.8 percent from 5,645 homes last September and down 34 percent from August, according to a report from DataQuick Information Systems, a La Jolla (San Diego County) research firm.

It was the slowest September since DataQuick started recording statistics in 1988 and the 32nd consecutive month of declining sales.

The credit crunch hit with a vengeance in mid-August, as lenders backed away from jumbo loans - those over $417,000. Since home sales typically take about 30 days to close, the fallout hit the September sales data. Tighter standards for jumbos had a particular impact in the pricey Bay Area, where, by necessity, most home mortgages are jumbos.

“The main factor in the September numbers is that the financing for jumbos dried up,” said John Karevoll, a DataQuick analyst. “Some will come back and some won’t. We just don’t know that yet.”

DataQuick said 1,935 Bay Area homes were purchased with jumbo loans in September, a 48.6 percent decline from August. Historically, the sales drop from August to September is 10 percent. The decline among non-jumbo loans was 14 percent, from 2,675 in August to 2,301 in September.

The median price for resale homes was almost steady at $670,000, a scant 0.4 percent more than $667,500 last September. The median price declined in five counties - Alameda, Marin, Napa, Solano and Sonoma.

The Bay Area median price has been propped up by a tilt in the mixture of sales - more high-end homes have changed hands, boosting the median. But with the credit crunch making it harder and more expensive to get a larger mortgage, the buoying effect of expensive-home sales was reduced in September.

“When you combine the price difference (for jumbos) with the restrictions in underwriting guidelines, that was a double whammy,” said Rob Chrisman, director of capital markets at NL Inc., a mortgage bank in Walnut Creek. “To compound it, buyers were possibly thinking that prices were stagnant or coming down in other parts of the nation and California, so maybe prices in the Bay Area would come down, so let’s wait. So you had three strikes against the jumbo market.”

Chrisman said jumbo prices are just starting to come down now. Instead of being 1.25 to 1.5 percent more than the rates on conforming, non-jumbo loans, they are now just under 1 percent more. Historically, jumbos have been 0.25 to 0.5 percent more than conforming loans.

The rising rate of foreclosures and defaults also hurts sales. When a lender forecloses, it puts the property on the market, often at a slight discount. Before a bank forecloses, desperate homeowners who are behind in their payments often try to unload the property as a “short sale” for less than they owe on the mortgage. Both types of sales further depress prices.

“I had an offer come in on a property in Oakley that was a probate sale,” said Don Forrester, a Realtor with Century 21 Hosking Associates in Walnut Creek. To show comparables to his client, “I pulled up 30-something (nearby) homes at that price level of $356,000. Eighty percent were bank-owned foreclosures or short sales. That was huge.”

Forrester said the price impact was clear: “A year ago, (that property) would have gone for $400,000. A year and a half before that, it was $450,000.”

Rising inventory levels are another factor that impact sales. The number of for-sale homes in September rose in seven Bay Area counties compared with a year ago, according to MLS data compiled by ZipRealty. In San Franciso and Marin, inventory numbers edged down 2 and 4 percent, respectively.

At the same time, every Bay Area county had a significant chunk of its listings showing price reductions, ZipRealty said. Price reductions ranged from 25 percent of San Francisco listings to 54 percent of Solano County listings. That doesn’t include homes that were removed from the MLS and then relisted at a lower price, a controversial but common practice.

As has been consistently true, affluent pockets of the Bay Area remain relatively immune to the current array of market forces.

“I haven’t had any clients who’ve been affected” by the credit squeeze, said Betsy Thagard, a broker with Green Planet Real Estate in Berkeley. “Here in Berkeley, prices are still tending to go up and we’re still tending to see multiple offers.”

The one fallout she’s noticed, Thagard said, is that inventory is tighter because people are aware this isn’t the best time to sell and don’t put their homes on the market unless they really have to.

Unlike most previous real estate slumps, the current situation wasn’t caused by economic factors such as big job losses.

“This is a cyclical downturn fueled by a lot of really dumb loans made from 2004 to 2005, the so-called subprime loans,” Karevoll said. “We’re not in a recession. We’ve got a fairly stable economy. It’s an entirely different correction than it was back in the mid ’90s, for example, when jobs were being lost, people were leaving California, people were making less money. This is somewhat uncharted territory.”

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/19/BU0BSS6UH.DTL&hw=real+estate&sn=001&sc=545