Foreclosure bargains continued to fuel soaring Bay Area home sales in February as the median sales price dipped below $300,000 for the first time since late 1999.
A total of 5,032 new and resale houses and condominiums changed hands in the Bay Area last month, up 26.1 percent from February 2008, according to a MDA DataQuick report released Thursday. The Bay Area's median price of $295,000 was down a record 46.2 percent from February 2008.
Throughout the Bay Area, 52 percent of existing home sales were properties that had been foreclosed at some time in the last 12 months. That's up from a revised figure of 51.9 percent in January and 22.3 percent in February 2008.
In Alameda County, 46.2 percent of existing homes sales last month were foreclosures while in Contra Costa County that number was 65.1 percent. In San Mateo County, 31.3 percent of existing home sales were foreclosures.
The rising sales and falling home prices come at a time when the Federal Reserve said this week it would buy up to $300 billion worth of long-term Treasury bonds and spend up to $750 billion to purchase additional mortgage-backed securities.
The Fed's trillion-dollar plus move is expected to keep mortgage interest rates to below 5 percent, which could make it easier to buy a home or refinance into a lower-interest rate loan. Even before the announcement, mortgage giant Freddie Mac said average rates on a 30-year fixed-rate mortgage had dropped to 4.98 percent this week.
"(The announcement) will definitely help the market as far as purchasing and refinancing goes, provided that there is equity in the home," said Cindy Romero-Lowary, a mortgage loan consultant at Cherry Creek Mortgage in Pleasanton. While it's likely that interest rates will go lower, that doesn't necessary mean that people who want to refinance or buy a home will be able to do so, said Allan Nuttall, a San Mateo-based mortgage broker at TOPP Lending.
"Until the banks start loosening up some of those (loan qualification) requirements the average homeowner is not going to be able to qualify for that, a refinancing, or even people that have pristine credit," he said. "Banks are still not lending a lot of money."
The Fed's action should help the housing market, said Dave Stark, public affairs director for the Bay East Association of Realtors, which covers southern and eastern Alameda County.
"It's very encouraging, not only for home buyers but for home sellers, especially in the Bay Area. Even though we see home prices coming down, it's still a challenge for many buyers to purchase a home because of the difficulty in securing purchasing financing," he said.
Foreclosures sales are not the only thing that's rising in the real estate world.
Government insured Federal Housing Administration loans made up a record 24.9 percent of all Bay Area home purchase loans last month, said the DataQuick report. A year ago, FHA loans accounted for 1 percent of purchase loans.
Rates for what's referred to as an ``FHA streamline refinance'' went below 5 percent after the Fed's move, said Romero-Lowary. Borrowers who are already in an FHA loan can apply for an FHA streamline refinance.
"In the last year, we have seen a lot of FHA loans. I have clients that closed in November and December. Last year, FHA loans were at 6.5 percent and now they are below 5 percent. It's going to save them a lot of money for payment over the next 30 years," she said.
A 30-year fixed-rate loan for $300,000 with a 4.9 percent interest rate would have a monthly payment of $1592, or $305 less than the same loan with a 6.5 percent interest rate, according to a www.bankrate.com mortgage calculator.
While FHA loans are growing, just the opposite is happening with jumbo loans used to finance homes that cost above the $729,750 conforming loan limit that applies in most of the Bay Area. Last month, jumbo loans accounted for just 17.5 percent of purchase loans in the region.
Andrew LePage, an analyst with DataQuick, said the Fed's move "has the potential to spur a lot more refinancing and it could spur some additional home buying, especially if the Fed action triggers more lending in the jumbo loan range. One risk associated with the Fed effort is that it could eventually stoke inflation fears in the bond market, which could put upward pressure on mortgage rates. We're just going to have to wait and see how this plays out," he wrote in an e-mail.
Eve Mitchell covers real estate and personal finance. Reach her at 925-952-2690 or firstname.lastname@example.org