BY JOHN COX Californian staff writer email@example.com
The housing market recovery that has renewed Bakersfield's status as a hot place to buy property is beginning to show signs of cooling.
Data compiled by local appraiser Gary Crabtree indicate that median home prices in the city remained virtually flat between June and July. It marked the first time this year that sales prices failed to post a significant month-over-month increase.
Crabtree and others say several factors appear to be in play, including rising mortgage rates and less activity by investors who have driven the local market since the housing bust.
While it remains to be seen whether the sluggishness will hold, some say the cooling effect may turn out to be a good thing, insofar as it eases off what may have been an unsustainable pace.
"It's going back to a normal market," Realtor Sheeza Gordon said.
As Crabtree sees it, July's housing data point to a few notable changes.
Foremost were the prices: The median price tag for a home sold in the city -- defined as the point at which half the homes sold for more and half for less -- gained a mere $25 from June to reach $195,000 last month. That's still about 38 percent more than the median a year prior.
Crabtree also reported that local inventory, defined as the number of homes listed for sale, jumped by 15 percent in July to reach 728. That's generally considered a positive thing because it provides product for homebuyers and Realtors, even as it remains low by historical standards and could put downward pressure on prices.
Home foreclosures posted a noticeable increase as well. Crabtree reported 148 of them in July, 38 percent more than in June. While Bakersfield experienced no fewer than 332 foreclosures in July of last year, the trend in recent months has been toward fewer people losing their homes, not more.
Perhaps most significant is Crabtree's sense that investor activity has tapered off somewhat over the last several months. He had no data to share, only observations that fewer groups and individuals are buying up and renting out single-family homes that would otherwise go to owner-occupants.
If his perception on this last point is accurate -- and others in the local industry say it seems to be -- it could signal a turning point.
Investors paying cash largely for foreclosure properties have accounted for about a third of all sales over the last couple of years, Crabtree estimated. Those investors need prices to stay below a certain point, otherwise they may not be able to make a healthy profit renting out the properties.
He said investors leaving the Bakersfield market would effectively keep demand down, which may end up pushing down prices.
Some professionals in the local market, including Bakersfield real estate broker Robin Ablin, were hesitant to conclude that one month's data confirms a trend.
"My phone's been ringing more and I've had more buyers," Ablin said.
"We still don't have enough inventory. We're still seeing, you know, multiple offers, and the recent pretty quick uptick by about 1 percent in interest rates -- you know, mortgages -- got a lot of people off the fence" to buy a home, he said.
But he agreed that investor activity isn't as busy as it had been.
For instance, he recalled recently putting a three-bedroom, 1,150-square- foot home up for sale in northeast Bakersfield. It seemed to him an "attractive rental."
To his surprise, he received no cash offers.
"It seemed fairly obvious at that price that it was too high for investors, or the investors didn't have any money," he said.
Bakersfield Realtor and broker Frank St. Clair, one of the city's biggest real estate investors, said he has noticed a bit of a market slowdown "although not dramatic."
He noted that lower-end properties "seem to still be going very well," leading him to suspect July's modest price increase may be little more than a seasonal dip.
St. Clair offered his own theory: More homes are dropping out of escrow before the sale is complete. Either because of buyer's remorse or second thoughts by the lender, he said, the jump in canceled sales is forcing Realtors to sell the same house more than once, leading to lower prices.
Sheeza Gordon, one of the city's top home sellers, said she noticed the slowdown about three weeks ago, when multiple offers stopped coming in on some properties.
One result was that she had to advise her clients that they could no longer "overprice" their homes by $10,000 to $15,000.
Another outcome was more closely related to interest rates on home loans climbing by 1.5 percent in a short time. Gordon said this abrupt change has meant that, for the first time in a while, sellers are having to pitch in on closing costs because there's less room for buyers to raise their interest rate to absorb such expenses.
As she sees it, a key lesson here is that buyers need to start saving up to cover sale closing costs. Otherwise, she said, it's not a bad thing that home inventory is rising, because people have better chances of buying the property they want and "we're not having a feeding frenzy.
"I think it's good," she said. "Prices don't need to go up so fast that it creates another bubble."