Dave Roberts

I wrote about the red hot REO market in Windsor, California about a month ago. I thought it would be interesting to go back and revisit some of the key ideas to see if the market is just as active. Well, it's great news for the real estate industry in general. For the bargain hunters it's getting harder and harder to be a successful buyer for a foreclosed home in Sonoma County. The REO inventory is flying out the door and isn't being replaced fast enough.

A month ago there were 12 active listings for foreclosed homes in Windsor. That number is now down to 8 bank owned homes on the market. During that same month, 24 REO listings have sold, 5 are pending, and there are 14 contingent sales in the works. The math is simple. We have barely a week's worth of inventory available for buyers looking for REO homes. Clearly, we won't run out in a week. The current listings average 55 Days On Market, so it may be these last homes lack curb appeal or aren't priced right. Whatever the case, it's clear that buyers for single family homes in Windsor are going to have to look at either short sales or open market sales.

In that context of a hot market for REO property, I am pleased to announce the long awaited return of open market sales in Windsor. There are 29 homes for sale in Windsor that are neither short sales nor REO listings. For the first time in more than a year, the majority of homes on the market are traditional real estate transactions with private owners. The fact that makes this market possbile is the high number of buyers of REO properties that have cleared the gutted market to make way for the new reality.

The very concept of a sale on the courthouse steps sounds dramatic. I've been hearing about these sales for years but never managed to find the time to attend one of these sales. The first problem I faced was finding the steps. Our Sonoma County administration complex has many building, some with steps, some the courthouse, but the fabled courthouse steps turned out to be a flat plaza in front of the administration building. If you've seen the sculpture near the intersection of Administration Drive and County Center Drive, you know where this spot is. What can I tell you. The reality was already diverging from my expectations.

I got there in plenty of time. I could have called some of the phone numbers available online to see if specific sales were going forward that day, but I just wanted to watch some action, so I didn't really care which homes got auctioned off, as long as I got to see something. It's a good thing I wasn't picky, because almost 85% of the scheduled auctions didn't happen. The big majority were by mutual agreement of the parties involved, but there were half a dozen properties where a bankruptcy proceeding blocked any sale of the property. By the end of the routine of postponements and bankruptcy cancellations we were left with 7 properties that were going to be sold.

This process had taken perhaps twenty minutes and the crowd moved in a little closer as the auction master started reading off the formal information about the sale. She covered the debt, the recording number of the underlying document, and the date of recording. She rattled off the proceeding number, the tax ID number and street addresses for the property as well as some incantations from the State of California. The final sentence was the declaration of the opening bid amount. In the first five cases, the opening bid was more than anyone wanted to overcome, and the request for an open bid...three times...was followed by a declaration that the deed was being returned to the beneficiary.

Finally, on the sixth try, we got an active auction going. The opening amount for this property was only $62,000 and a series of four bidders made their way to the auctioneer to demonstrate their financial bona fides and provide their names. I should mention the auction master made it clear that cash or cashier's check were the only legal tender for the auctions and that even though she might say "sold" to a high bidder, until the money was in her hands, the bidding was still open.

The auction was a leisurely affair. I'm used to "goods" auctions with a fast, furious pace that is designed to extract the maximum money from your wallet by ginning up excitement and enthusiasm. This was more like watching paint dry...but not as active. The normal pattern would be for a bidder to propose a number. Let's say $65,000 for example. The auctioneer would record it and repeat it for the record and the next bidder might (would) say "plus 100". The next guy might say "plus 100 more" and then maybe if the drama didn't cause a fainting spell, the original bidder might say, "$66,000". There would be a long pause, much talking on cell phones, wandering back and forth on the plaza and then the fateful words, "plus 100". This went on for about an hour at which time the winning bidder (pictured with the phone to his ear (also the main Mr. Plus 100)) got the right to pay $128,000 for the property. I think that was probably a good deal, but several bidders had stopped at around $115,000, so maybe the deal isn't as good as I thought.

A couple lessons to pass to you newbies out there.

• Wear a hat and sunscreen
• Bring a chair
• Do your research about what will be sold

This is not a market for the timid or poor. You have to pay cash. You don't get any do-overs or timeouts. You don't get any inspections you haven't already done. You don't get to say, "Oh, I thought that was a first loan." when you figure out you bought a house...and a mortgage. In other words, only bid if you know what you're doing. That being said, it was a moderately entertaining lunch hour with real money changing hands. If I would have been smart enough to bring a lawn chair, umbrella, and a cold beverage I would have been set. Maybe I'll see you there next time.

If you want to follow the latest trends in Sonoma County real estate, check out the Altos Research chart on my real estate home page.

Sebastopol remains one of the most desirable areas in Sonoma County. The schools are strong, the children above average, and everyone is beautiful. No, seriously, Sebastopol is a great town. If you want to see what's available as REO bargains, check out my Sebastopol REO map.

If you'd like to keep updated on the Sebastopol market you can sign up to get a weekly report with a detailed analysis of sales, trends, and projections.

Are real estate agents that good in Sonoma County...or are the banks holding back.

Did Sonoma County agents really clear out almost all the available inventory of REO listings?

Looking for listings for a new client this week I started to realize the pool of available listings was dramatically smaller than it was a few months ago. I pulled the numbers for Windsor, CA where I have been active recently and was astonished to see less than a dozen active listings. Anybody who reads my blog knows I like diving into the numbers when reality slaps me in the face, so I got busy with the MLS and Realist databases.

Two things are clearly going on based on the chart. First, REO property is selling like crazy. Look at the sold numbers. We're easily over 20 sales per month average for the first part of this year. Additionally, the combined contingent and pending bars show 30 properties likely to close in the near future. The contingent and pending listings clearly outnumber active listings which are down to 12 units.

A market that has absorbed over 105 homes in 14 weeks now has just 12 listings to choose from. For those keeping track at home, that's less than two weeks of inventory.

The final bar in the chart may help tell the story. There are 35 REO homes that aren't on the market yet. You can choose whether the banks are holding back to drive up prices or are too busy to get the listings ready to sell. Between evictions, clean-up, repairs, and setting value, it takes a while to bring an REO property to market. However, even if all 35 bank owned homes in Windsor were magically dumped into the market today, buyers for foreclosed property in Sonoma County would snap them up in about a month at current rates.

So, whether it's 12 homes available or 47, we're looking at less than two months of inventory. I think that's a hot market in anybody's book.

I work mostly in Sonoma County, but Marin is close to home and some of the same buyers will look in both Novato and Petaluma. I posted about finding a bottoming trend in one of the Sonoma County areas I work in and wanted to see if Novato in northern Marin showed the same trend.

I made a chart showing the median price of sold single family residences in the three Novato zip codes. Each zipcode has both a 90 day moving average as well as a more volatile 7 day moving average. There are always lots of interesting tidbits to pull out of charts like this so I'm going to walk you through how I use this to understand a bit more of the market. First of all, the orange and red lines (94945 and 94949 respectively) start out at the same place last May at around $870K for median priced homes. As of early April, the 94949 zip code median price had dropped to around $750K. Not bad with respect to the general real estate market. The 94945 zip code, by contrast, had dropped to 650K, more than $100,000 less. It's hard to make a clear reading without checking each transaction to find out if there were unusual circumstances, but it's an observation that jumps off the chart. The lowest median price zipcode, 94947, dropped from around $670K to about $590K in the same time frame, so it didn't fare too badly in comparison with 94945.

Each of the zip codes also has the more jagged 7 day median price line. I have drawn red circles around the points on the 7 day line that might represent the Novato SFR market finding a possible bottom. We're in the spring so activity tends to be higher than otherwise, but the same time last year saw a still-declining market. I'm not going to call this a market bottom since my crystal ball is as cloudy as everyone else's. What I do have is a spreadsheet and chart that tells me prices have firmed up this spring. We haven't seen the line move up to show the price change trend on the 90 day moving averages, but I like being able to advise my clients of market moving trends like this before everybody else spots them. (Ssshhhh, don't tell anyone about this post!) That's what makes it so much fun to watch both the 7 day and 90 day lines.

A final caveat. Markets like Novato have small enough sales volume that just a few exceptional sales can skew the data up or down. When I want to analyze situations like this more closely, I'll actually divide the sales into quartiles to see if one segment is signifcantly out of sync with the rest. As an example, I can tell you that in the top quartile in Santa Rosa prices are still falling even though they have moved up in the lower half of the market. So take this chart with a grain of salt and give me a call if you want a more detailed analysis of any area in the North Bay. For the best bargains in the North Bay check out my REO Marin site for foreclosed homes in Marin County, REO Sonoma site for bank owned homes in Sonoma County, and these other links:

REO Napa
REO Mendocino
REO Lake County
REO Vallejo