Housing Market Still a Challenge for Both Buyers and Sellers

Hit by a double-dip drop in home prices, sellers face challenges not felt since the great depression. In California, home prices tumbled 8.2 percent in May compared to one year ago.

At the same time, buyers with less-than-stellar credit find it harder to obtain financing. Buyers are also worried that a home may not be a good investment right now. To counter the problem, government-backed programs like Fannie Mae and Freddie Mac are providing incentives to bring buyers back—especially those who plan to live in the home rather than buy it as an investment.

Real estate experts say that both sellers and buyers can still profit in today’s housing market. The key for sellers is to work with a real estate agent to determine what price can be put on a home that will benefit the seller and attract buyers.

Coldwell Banker CEO Jim Gillespie, recently appearing on a CNBC panel discussion on “Housing: Near the Bottom,” said that if a home is priced right it will sell. “There are plenty of buyers out there,” he said. "It’s just a matter of pricing it right and making sure you listen to your professional Realtor.”

But sellers are concerned they may not get the mortgage they want for a new home if they sell the one they’re in. The panel agreed that buyers need better access to credit.

Potential buyers should study mortgage options and be cautious in making sure they can afford the home. They should also consider sharing a home, possibly with other family members.

Renting remains an option, but rents are going up. The regional Consumer Price Index shows that in May, Southern California rents took the biggest jump in two years. Rents rose 1.7 percent in May over one year ago—and they are expected to rise further.

Both the seller and buyer are key to getting the real estate market moving again. The market appears to have bottomed out, but a surplus of available homes remains a problem.

Foreign investors with cash have taken some of the inventory off the market. That could help bolster the market, but it can also prevent people who need a home from scoring the best deals. To help in the situation, Fannie Mae, which has been acquiring thousands of foreclosed properties, is offering qualified homebuyers up to 3.5 percent of the final sales price to put toward closing costs. In addition, selling agents representing buyers who plan to occupy the home can receive a $1,200 bonus. The incentive must be requested at the initial offer.

What’s important is that Fannie May has a rule that owner-occupants get a first look at real estate owned homes before investors can bid. An REO is a class of property owned by a bank, government agency or government loan insurer. Fannie Mae can be contacted at (800) 931-7377. Information can also be found at CaliforniaReal EstateCenter.com.

One encouraging thing for Orange County sellers is that the year-to-year median price drop recorded in May was much smaller in Orange County than it was statewide. The median price was $425,000, which is down 2.2 percent from one year ago, according to DataQuick. It is also down from a $430,000 median price for April. Sales of existing homes are down 8.8 percent from one year ago. Sales of condos are down 17.6 percent for the same period.

In Fountain Valley, the median listing price stands at $589,900, according to eVantage Real Estate. Homes are on the market for an average of 105 days. The percentage of properties with price decreases is 41 percent this week, compared to 39 percent the first week of June.

The bottom line is that it remains a buyer's market, with many buyers still on the sidelines fearful that homes may not be a good investment at this point. However, the deals are out there and foreign investors are taking advantage.

Buyers from overseas spent about $41 billion on US residential real estate in 2010, and the number could go higher this year. Real estate agents report a surge in foreign investor purchases this spring; they are attracted to prices that are 30 to 40 percent off their peak.

Los Angeles is reported to be the top location for home investment by overseas buyers, so Orange County is likely to be high on the list too. Buyers include Chinese, Russians, Japanese, Middle Easterners and Brazilians.