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2010 finds Fallbrook real estate on the upswing - Average/median prices rise for first time since 2005

While arguments can be made in favor of and against the hope that the real estate market in Fallbrook is finally beginning to equalize and start improving, the statistics for the first three months of 2010 are favorable. In its report ending March 31, SANDICOR, the San Diego County Multiple Listing Service system, shows the first increase in average sales price and median sales price since 2005.

“My belief is that Fallbrook is on the upswing,” says Chris Hasvold, broker/owner of Coldwell Banker Landmark Group, in Fallbrook. “[Fallbrook] was one of the first community’s in the county to feel the hit and now it looks like we are leading the way out.” Hasvold said the North County coastal areas (from Carlsbad to Rancho Santa Fe) went into the slump late and are still showing negative numbers.

“They are experiencing what we experienced two years ago,” says Hasvold.

Oceanside, he says, “got hammered early, like we did.”

Recapping the decline of the market, Hasvold says from 2006 through 2009 Fallbrook property owners took a 50 percent “hit” in their property values and the local real estate industry suffered an 80 percent (sales unit volume) reduction.

The final SANDICOR statistics for January 1 through March 31 of this year show a total of 41 single family home transactions. The average sales price of a home in those months was $386,892 with the median price being $340,000. Given those numbers, the average sales price increased 1.50 percent over 2009 and the median price rose 0.37 percent. Small increases, but positive nonetheless.

While there are currently 245 homes listed for sale in the Fallbrook (92028) market, Hasvold says that’s a low number. The demand for homes priced in the average/median is great and are being snapped up quickly, he says, in many cases within two days of listing. These homes are typically described as being 20 to 25 years old, three bedroom, two bath, just under 2,000 square feet, on about one acre of land, he says.

“Our inventory is too low for a healthy market,” says Hasvold. “We need more homes in the $300,000 to $550,000 price range. The median price of homes that are currently listed for sale is $599,000 and the average is $759,000. That’s where the disparity is.”

Hasvold says homeowners are having a hard time “letting go” of what he calls the “good ‘ol days,” circa 2004 and 2005, when prices were greatly inflated.

“The average sales price in 2005 was $671,164 and the median was $595,000” he says.

While values started declining in 2006, the greatest drop took place in 2008 when the median sales price plummeted 28.57 percent. That was followed by a 15.31 percent drop in 2009.

Many homeowners have hung on to the hope that the market will bounce back – big and all at once.

“A lot of people have a mental block; they feel like those prices are going to rebound and they aren’t willing to sell it for what it needs to be priced at,” he says. Others have made significant improvements to their properties or high mortgage balances.

“We’re seeing people who have too much in their properties to sell it for the price it will bring now; they say they are waiting for the market to ‘come back.’”

Waiting for a big rebound in the market is most likely a false hope, Hasvold says.

“My general feeling is that we are currently at the bottom [of pricing] in our area, but it’s going to be years before it comes back to what people call ‘the good ‘ol days.’”

Hasvold explains it simply. “If you just do the math, it becomes very apparent . Taking out the “high’s” and the “low’s,” if you look at how much real estate has appreciated on the average historically, it works out to between three and five percent per year. Given the fact that we’ve experienced a 50 percent drop in values over the past few years, if you use the greater appreciation rate (5 percent) each year it would take ten years to get back to those values.”

However, Hasvold doesn’t think it will happen in ten years.

“We are still churning through this short-sale stuff and I estimate it will be closer to fifteen years to regain that 50 percent.”

That additional five years that Hasvold is referencing he attributes to the fact that some people are still behind in their mortgage payments but have not been foreclosed on by their lenders.

“In some ways that’s okay, because it would provide more inventory, but it would keep prices down longer,” he says.

For those who merely wish to sell and purchase another home that is better suited to their lifestyle or family needs, Hasvold says there is no reason to wait, as the market is equal.

“If you need to move, move now,” he says. Hasvold gives a good example of the merit of doing that.

“If you are selling a house currently valued at $400,000 and looking at buying one valued at $500,000 and you wait for values to increase 10 percent, you will only gain $40,000 more for your house, but pay $50,000 more for your new place – waiting will cost you $10,000 more and you’re behind the game.” Trading up sooner rather than later also means a lower property tax base, versus when sales prices increase.

Statistics for homes in Bonsall are a little trickier to interpret. Due to the lower volume of sales in the 92003 zip code, percentages are skewed easily.

The first three months of 2010 show a 24.69 percent increase in the average sales price, bringing it to $657,102 and a 29.76 percent increase in the median price, reporting it as $532,000. However, those statistics are based on a total of three sales.

“I don’t look at Bonsall activity in short increments for that reason,” says Hasvold. “I tend to look at it in six month increments.” The average sales price of properties listed for sale in Bonsall is currently $1,961,000.

Home prices aren’t the only thing that’s changed the past few years, so has the mortgage market, but a local expert says loans can still be arranged smoothly.

Patrick Marelly, of Loan Warehouse in Fallbrook explains that, “Right now the mortgage industry has gone back to the way things were over 20 years ago, where everything had to be fully documented; you have to prove income, cash on hand, and demonstrate good credit through your credit score.”

Marelly said about 70 percent of the home loans he is handling in today’s market are through the Federal Housing Administration (FHA) and says the process “is not very difficult.” The FHA mortgage limit in San Diego County is $697,500. In neighboring Riverside County, the limit is $500,000.

“FHA is very desirable because they only require a minimum three and a half percent down payment and a minimum credit score of 620,” Marelly says. “When you are talking credit scores, a 620 is the equivalent of a letter grade C-. As long as you can prove your income and have the down payment money in the bank, it’s a very easy loan to use.”

Marelly says his success rate in securing FHA loans for home buyers is good.

“Out of 10 applications we submit, we usually can qualify eight of them.”

“What you hear in the news about how difficult it is to get a loan; that’s ridiculous. It’s not very difficult,” he says, adding that the current interest rate on FHA loans (the day of the interview) was just slightly above five percent.

What Marelly says people are wise to take advantage of is available tax credits.

“The federal first time home buyer tax credit is $8,000. That is due to expire April 30, which means a home has to be put in escrow by April 30 and close by June 30, 2010.”

In addition, Governor Schwarzenegger is expected shortly to sign into law a new California tax credit of $10,000 that can be claimed over a three year period for first time homebuyers effective May 1 through December 31 of this year.

When asked how he expects 2010 to turn out overall, Hasvold says he is hopeful.

“Like with most things, there are mixed signals; the fact we’ve trended up for the first time in four years is a positive sign; that we’ve weathered the downturn and are still here is a good sign; and a lot of the media outlets on a local and national level say they believe the worst is over but there are still some that don’t feel that way.”

With plenty of inventory sitting on the market in the over-$900,000 price range, but little in the median, current Fallbrook market conditions are unusual in that it contains both a buyer’s market and seller’s market.

“It’s definitely a buyer’s market when you talk about the upper-end price range; but it’s a seller’s market in the lower end,” says Hasvold.

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