Signs of thaw for housing freeze?

World market insecurity has had its effect in Sonoma. In the past week, say realtors, the sinking housing market – opportunity for some, tragedy for others – has virtually frozen as investors and other buyers wonder, “How low can this go?”
“This is my fourth recession,” said Cynthia Wood, who has been in business in Sonoma since 1983 and is a broker with Sotheby’s International Realty, “and this is clearly the worst after the early ‘80s. This one is going to be longer, more severe, deeper; it’s just going to take a long time for people to come out. The buyers that are out there are afraid. They really believe it’s going to be a long haul, and you can’t argue it.”
The freeze has set in despite the bargain-basement prices resulting from falling real estate values and a rising tide of foreclosures. “We have seen a significant rise in short sales, pre-foreclosures, and [real estate owned] REOs,” said Wood. “I would suggest there are between 50 and 100 properties in our community right now in one of those statuses.” Interest rates, she said, are “historically low.” But even with cut-rate prices and low interest rates, still, the market is sluggish. “People can’t borrow money,” she said, “It’s 25 percent down to buy anything.”
Kevin O’Neill of Countrywide Home Loans was more optimistic. “There’s plenty of capital out there for mortgages,” he said. “I think the work the world governments have done to support their institutions will start coming into effect. There’s going to be a long road out of this thing.” He said there are all kinds of rates:  “You can get an FHA loan for 3 to 5 percent, owner occupied. You need 20 percent down for loans up to $1 million, non-owner-occupied, and 25 percent down for loans over a million. What we’re hoping to see in the coming weeks is stabilization of interest rates.”
Gone are the “stated income” loans, or the “liar loans,” as Bill Dardon, owner of The Real Estate Company, on the Plaza, calls them, that got so many in trouble. Now, buyers have to qualify, so the trend is for investors to snap up the bargains – and there are a lot of them around. “The inventory right this minute is 289 units available in Sonoma today, from condo on up.”  The result could be predominantly investor-owned neighborhoods. “It could have an impact on the spirit of the neighborhood,” said Wood, “when all those cute little families are gone, and people don’t know their neighbors.”
But even for qualified investors, it’s not easy, said Dardon, as they find themselves caught up in bidding wars. “Two of my agents are working on a property and they got their offer in, and next thing you know, here’s four offers.”  To him, it seems a head-spinning time. “After 35 years in the business, I don’t know up from down right now,” said Dardon. But ever the optimist, he said he’s sure that in time the market will turn around.
One positive change, he said, has been the passage, on July 8, of SB 1137, the California Foreclosure Reform bill authored by senators Don Perata (D-East Bay), Ellen Corbett (D-San Leandro) and Michael Machado (D-Linden). The bill requires mortgage holders to consult with borrowers before filing a notice of default and gives tenants in foreclosed properties 60 days in which to leave, and it also allows governments to fine owners of foreclosed properties that fall into disrepair.
Dardon said he’d encouraged his buyers who are having problems keeping up with their payments “to hang in there, because once the bill was in, the bank couldn’t say ‘No’ to you. They have to work with you.”
For those unversed in English, that is not so simple.
Carmen Cervantes, president of the National Association of Hispanic Real Estate Professionals, said many in the Hispanic community, which has been hit particularly hard, are still vulnerable. “Some of them are falling into another world of scam. Emotions, overburden, shame, they’re putting themselves in jeopardy – and they find themselves with the sheriff knocking on the door because they didn’t open the [bank’s] letter.  There are scam artists coming around and saying, ‘You give me $7,500, and I’ll make it all better.’ They need to go to a local realtor.”
Ellen LaBruce, of La Luz, said the organization had held two workshops for families who had lost their homes due to foreclosure or were about to lose them. “We had 40 people attend the first one and about 25 the second one. People had an opportunity to talk to lenders, to attorneys, to experts in housing law and to reputable realtors about renegotiating their mortgage when that was possible and about rebuilding their credit rating when it wasn’t.” The key is helping them to educate themselves, said Cervantes. “It’s changing daily. They’re beginning to sort out what this whole rescue means. We’re going to continue to see changes. [Buyers] should go ahead to connect with a realtor and say, please help me.”
And, said Kevin O’Neill, “Get two opinions – like you’re going to a doctor.”