Santa Clara County home sales up, prices down — market still unsettled

Home sales in Santa Clara County jumped 17 percent in September over a year ago as homebuyers locked in low mortgage rates and made an eleventh-hour grab for a federal tax credit set to expire next month.

Santa Clara County saw 1,307 home sales, up from 1,116 in September 2008, according to MDA DataQuick of San Diego.

Meanwhile, median prices dipped about 2 percent month-to-month in September, a smaller drop than a month earlier, suggesting the market's decline could be nearing the bottom. They had fallen 5 percent from July to August.

The median price was down 8 percent from September of last year, from $550,000 to $506,000. One factor driving down the median price is that more and more homes being sold are at the lower end of the market.

With market indicators flip-flopping all over the map — foreclosure activity remains high by historical standards, for instance, and nonowner-occupied buying is above average — the erratic numbers are a sign of the times.

"It's a very unusual market out there, and it looks different depending on what angle you're looking at it from," said Los Gatos mortgage broker Narbik Karamian. "From my side, activity looks very strong, with lots of purchases taking place, partly because of the government's $8,000 tax credit that people are jumping on at the last minute. But then you look at the foreclosure numbers, and they show the economy as weakening."

Although Thursday's report showed a slight dip in foreclosures across the Bay Area, DataQuick's Andrew LePage said foreclosures were up a bit in Santa Clara County, where they represented 27.2 percent of all houses and condos sold in September, up from August's figure of 26.4 percent. And that number remains historically high — LePage said it was 3.9 percent in September 2007 and that it never reached double digits in the mid-1990s housing correction.

Karamian says foreclosures remain historically high not only because some owners can't modify their loans, but also because some have lost so much equity "they just want to let the house go."

So there could be more trouble on the horizon. LePage says "the big picture in most places is that prices are close to flat, but that could change if we get a new flood of foreclosures. Loan delinquencies are still growing, and there's a lot of distress out there. What's not clear is how many of these will end up as loan-modifications or short sales or something else.

"Whatever price stability you see now could turn out to be temporary," said LePage. "We are nowhere done with these foreclosure problems in California. There are more chapters left in the book."

The month-to-month jump in sales for Santa Clara County — about 9 percent from August to September, was atypical: sales normally decline around 10 percent in the county from August to September. DataQuick's statistics, which go back to 1988, show that September sales have increased three other times, in 2008, 1992 and 1988.

Matt Anderson, with economics research company Foresight Analytics in Oakland, said part of the sales jump can be attributed to the drop in interest rates over the past few months.

"The market seems to be following the lower rates with a one- or two-month lag," he said, "which makes sense because homebuyers are typically under contract for a month or two. And given that rates have been falling the past few months, we think the October and November figures could look stronger than a year ago as well."

But experts say real estate's fate longer term will be tied to the greater economy and, in particular, the jobs outlook. And as Anderson pointed out, if sales are driven largely by affordability, and affordability is driven largely by employment, then any apparent rebound in the housing picture could be short-lived.

"To really get it into a true recovery, we're going to need job growth to return, and that hasn't materialized yet," he said. "So the market appears to be in the midst of what you might call a fragile recovery."

Contact Patrick May at 408-920-5689.