We're all seeing the return of a sellers' market for entry level homes. I've posted about it earlier and many of you commented that your areas are also affected. The saddest situations I see are for the first time home buyers struggling to finance a low priced home who are repeatedly losing out to cash investors. It's easy to say it's the market in action. It's harder when you are working with young couples with children trying to get started as home owners and get their kids enrolled in a good school.
I analysed recent sales data to try to show what has happened in Sonoma County. I listed just single family residences that sold since July 1, 2009 for less than $250,000, a level that is definitely entry level in this coastal California area. These are the homes for service workers, recent graduates, young couples, etc. Earlier this year there were hundred of these properties available and most people with good credit could qualify to buy...and the homes sold quickly. The newer data tells a different story.
The chart includes a data point for each sale. The far left side of the chart includes lingering listings from late in 2008 and early in 2009. Intuitively, you will guess that these long time on the market homes are not going to sell for a premium. That's borne out by the fact that the data points are all near or beneath the zero line on the chart. As you read to the right, there are data points above and below zero reflecting overbids above the line and underbids beneath it. There's a strong mix of sales prices. The middle of the chart are primarily short sales that went into contract between February and May and they reflect a slight trend towards overbids, but still a good deal of balance.
The right side of the chart tells today's story. The large majority of sale data points are now above the line. I have made a greenish color bar from the zero line to the $8,000 range that reflects the first time home buyer's tax credit. Most of the data points are at or above that green bar. The positive effects of the tax credit are being eaten away by the higher demand for housing that has created the overbid situation. Every data point in the upper orange area has effectively had their tax credit consumed by the higher price they had to pay for the house.
The blue area under the zero line contains the data points for peope who were able to purchase their Sonoma County home for less than the listing price. These buyers are the ones who benefit the most form the first time homebuyer's credit. For everyone else, the tax credit may have had the unintended consequence of spurring the market to rise higher and faster than it would have otherwise. I think we can all be glad for a return of a real housing market that supports regular homeowners being able to sell their homes. On the other hand, I think I'm going to miss the days when I could find affordable homes for everyone with a job, decent credit, and a pulse.