While many people are not ready to say the Great Recession is over, the housing market in Nevada County is showing clear signs of recovery, according to local experts.
“It is like night and day from last fall to this first quarter,” said veteran Realtor Cheryl Rellstab of Grass Valley.
Already this year, more than 250 homes have been sold, mostly single-family residences, reported Christine Foster, president of the Nevada County Association of Realtors.
“We’re definitely on the way up,” agreed CPA Mary Owens of the Owens Estate and Wealth Strategies Group of Grass Valley and Auburn. “The market clearly hit bottom in 2012.”
Buyers and sellers at odds
Whether this is good news or bad news depends on whether you’re a buyer or a seller – and even that depends upon at what economic level you’re trying to buy or sell.
Foster said 68 percent of the homes sold so far this year have been in the lower third of the market, under $300,000. There is some growing interest in the mid-level market, but she said the upper end of the real estate market is still fairly stagnant – except for the $1 million-plus “McMansions” where there is some movement.
“The wonderful thing is that young people can afford to buy now, when they couldn’t five years ago,” said Foster, who is a broker for diversified real estate services at Christine Foster & Associates/Verger Mortgage and Investment.
Making sub-$300,000 single-family homes even more attractive to young and first-time homebuyers is that “interest rates are still fairly low,” added Foster.
‘Cash is king’
On the other hand, “The inventory is low,” noted Kathleen Hinman, association executive for the Realtors association.
Owens concurred, “We are at historical lows for inventory, both nationally and here in Nevada County.”
Low inventory means “buyer demand is high,” Rellstab pointed out.
This is not good news for first-time buyers with “low down loans,” because “cash is king,” Rellstab said. People and firms with money are outbidding buyers with loans.
“All-cash buyers are taking over the lower end of the market,” Owens confirmed. Using CMOs (collateralized mortgage obligations), private equity investors are buying thousands of homes across the country. This is driving down inventory and pushing prices up, she said.
And it’s not just home prices that are rising. Equity investors do not move into the homes they buy. They rent them, and that’s pushing up the cost of renting, Owens added.
“Short sales and REO (real estate owned) properties [i.e., bank-owned foreclosures] used to make up over 30 percent of our market. Currently, it is only about 10 percent of our market,” Rellstab reported.
Bay Area pushing local market
Young, local first-time buyers are also facing stiff competition from out-of-towners. “There are buyers from the Bay Area looking to move up here,” explained Hinman.
“We are very attractive to the Bay Area,” especially for retirees, agreed Foster.
“The Bay Area is totally a seller’s market with multiple offers and selling well over the list price,” said Rellstab. Thus, “the Bay Area tends to drive our market up.”
“People were scared five years ago, now they are anxious to buy before rates and prices go up,” Foster said.
“When people change their mindset from, ‘The market is bad and it is risky to buy,’ to, ‘I better hurry up or I will have to pay more for less,” they tend to jump in,” Rellstab agreed.
New homes on hold
Meanwhile, new-home starts, speculative builders, and so-called “flippers” (people who buy distressed properties, renovate them and resell them for a higher price) are not having much luck in the current market.
“The financing is difficult,” Foster noted.
“We really don’t have any new homes,” Rellstab reported. “In about 2007, the speculative builders got out of the market. Land wasn’t selling in the past few years – but that is starting to turn around.”
She cited anecdotal evidence that the market might be improving. “I ran into Greg Peters of Peters’ Well Drilling & Pump Service, and he has noticed more calls for wells to be drilled,” Rellstab concluded.
Tom Durkin is a freelance writer/photographer in Nevada City. He can be contacted at firstname.lastname@example.org.
“The wonderful thing is that young people can afford to buy now, when they couldn’t five years ago.”
— Christine Foster,
President of the Nevada County Association of Realtors