Real estate statistics for the first six months of 2011 are in. And thus far, the year-to-date figures for Davis home sales in 2011 are looking an awful lot like the figures for the same six-month period last year.
The number of Davis homes sold between January and June this year almost exactly mirrors the sales figures for 2010. And while the average home price showed a small single-digit decline, that modest shift may not be particularly significant.
Herb Cross, vice president of Lyon Real Estate, ran preliminary figures for The Enterprise in late June. Cross said that during the first six months of 2010, there were 196 Davis homes sold, with an average sales price of $496,020. And during the first six months of 2011, Cross counted 189 sold properties, with an average sales price of $477,697.
“It appears to me that 2011 is a relatively stable year in Davis,” Cross said. “On average, we lost about 3.7 percent (on the average sales price). But that doesn’t necessarily mean that every house in Davis lost 3.7 percent. More homes in the lower price range may have been sold this year, and fewer in the higher price range. You have to be careful about how you interpret these statistics.
“Right now, the main current of movement in Davis is for homes priced between $300,000 and $500,000,” Cross said. But there also have been a few sales in the $1 million to $1.5 million range. Also a number of sales in the $200,000 to $300,000 range — “mostly condos and fixers,” Cross said.
Cary Arnold, of Coldwell Banker-Doug Arnold Real Estate, ran a sales count for The Enterprise a week or two later than Cross (during early July), and came up with 198 Davis homes sold in the first six months of 2010, and 197 homes sold during the first six months of 2011. Her statistics also showed the average sales price for a Davis home at $498,780 for the first six months of 2009, $498,990 for the first six months of 2010, and $477,796 for the first six months of 2011.
Dave Taormino, co-owner of Coldwell Banker Doug Arnold Real Estate, observed that “Davis prices and sales activity were stable for the first half of the year, which is especially encouraging considering that the federal tax credit (for certain homebuyers) that was offered last year moved a number of anticipated sales during the second half of 2010 into the earlier months,” boosting the sales figures for January to June 2010 to a degree.
Part of the reason for the comparative stability in the Davis market is the relatively low percentage of foreclosures and short sales in Davis, as compared to other nearby cities. Cross said that foreclosures and short sales have accounted for around 26 of the nearly 200 homes sold in Davis this year. In Woodland, there have been 156 homes sold this year that were either foreclosures or short sales, out of a total of around 269 Woodland homes that sold between January and June.
That pressure from a higher percentage of “distressed properties” is part of the reason that the average Woodland sales price has been running in the low $200,000s, while the average Davis price has been running in the high $400,000s.
Home prices in West Sacramento and many neighborhoods in Sacramento are likewise continuing to be driven to a large degree by a high percentage of distressed properties on the market; in many neighborhoods there, price drops of 50 to 60 percent from the peak (around 2005 and 2006) are not uncommon.
Home prices in Davis — where the average briefly flirted with the low $600s at the peak, and now seem to have settled in the high $400s — have suffered less by comparison.
“The Davis real estate market continues to be an oasis compared to the desert elsewhere in the Sacramento region,” Taormino said.
Cross noted that another difference between Davis and other parts of the region is that there hasn’t been any significant amount of new construction in Davis during recent years. The newer construction during the boom years from 2002-06 has been hit hardest by the foreclosures, he added.
“Since Davis hasn’t been affected as much (by foreclosures), we haven’t seen as much of a decline in property values,” Cross said. “Davis is related to the surrounding market, we can’t escape that. But within our own marketplace, the influence of foreclosures and short sales has been minimal. Davis has always been a relatively conservative community in terms of the attitude toward investment and real estate purchases. Davis is a relatively safe community in that regard.”
But now a trickle of new homes are coming onto the market. Earlier this year, Regis Homes opened up the Verona subdivision on Fifth Street near Alhambra Drive — an “infill project,” which eventually will contain 83 homes on compact lots. Fifty-nine of these will be detached homes, ranging in size from 1,539 to 1,794 square feet, priced in the $400s. There also will be 22 attached “duet” (duplex) homes, which are smaller, and priced in the $200s.
Bill Heartman, president of Regis Homes of Sacramento, said that Verona started with a limited number of units to test the market for new residential construction in Davis.
“We built four models, and have 10 units under construction,” Heartman said. “Four units are sold, and another three or four are in the final discussion period, with prospective buyers getting their ducks in a row. We will probably start construction on the next 10 units in August. And if they sell as quickly as the first 10 units have been selling, we’ll probably start another 10 units by the end of the year.”
Heartman said Verona, which is on a plot of land in Mace Ranch that was originally zoned for a small neighborhood shopping center, was rezoned for residential use in 2006.
“But we came online right when everyone was concerned about a Wall Street meltdown. There was no lending going on. It took us a year and a half to get construction financing done.”
Heartman added that while he’s encouraged by the initial sales at Verona, he is aware that “people are much more cautious” about making a decision to buy a home as compared to a few years ago.
“But because there have not been many new homes in Davis, especially at this price point, we’re finding our sales here are stronger than in other communities in the Central Valley,” he said.
Another new project is Willowbank Park, which eventually will include 29 homes in South Davis. Compared to Verona, Willowbank Park has larger homes (2,285 to 2,504 square feet) on larger lots, with prices in the $600s and $700s.
Taormino said “sales at Willowbank Park are averaging one per month, which is well above average for the price range in the Sacramento region. We expect sales activity for Phase II to increase in speed due to the lower price ranges being offered, compared to the more expensive homes in Phase I.”
A few other small projects, like Warmington Homes’ Mahogany subdivision, are poised to start in the relatively near future.
What continues to motivate buyers to pick a house in Davis, when similar-sized homes can run about half as much in nearby communities? As some wry observers of the real estate market have pointed out in the past, no one ever moved to Davis for proximity to an ocean beach, or crisp, cool mountain air.
“It’s the lifestyle, the schools, the parks and pools, the cultural events, the amenities,” Cross said. “Davis is still a city of choice.”
What sort of trends are on the horizon for the second half of 2011? Taormino is moderately optimistic.
“Projections for the second half are looking much more positive than last year,” he said. “I expect the sales activity in the remainder of the year to exceed last year’s pace, bringing the total sales for 2011 to somewhere in the range of 4- to 8-percent higher” than 2010. But that would still be well below the market peak in 2005 and 2006.
Taormino said that “the one dark cloud (on the horizon) is the new (federally backed) mortgage financing limits, starting Oct. 1. This will likely increase interest rates slightly for loans above $600,000.” That could have the effect of chilling sales a bit for higher priced homes, while simultaneously motivating a few more prospective buyers to focus their attention on homes priced below the $600s.
Cross agrees that the pending cap on federal backing for larger mortgages “could have an impact on the local market, and also the Bay Area. It doesn’t mean those buyers can’t get money, but it means it could be more expensive to borrow the money for higher priced homes.”
Cross said he’s also watching the interest rates on ordinary mortgages for mid-sized homes.
“The interest rates have been low by historic standards, and stable for a long time,” Cross said. “But these interest rates are very sensitive to the marketplace. And they can be very sensitive also to international developments. As there is more demand, and the housing market loosens up, we’re probably going to see mortgage interest rates go up.”
Cross also mentioned the possibility that Congress might abolish the longstanding federal income tax deduction for mortgage interest — a step that a few federal officials and members of Congress have suggested should be considered. Cross said that losing the mortgage interest deduction would be “devastating” for real estate sales. But the mortgage rate deduction is very popular with voters, so most observers feel it is likely to continue.
Cross added that he’s encouraged by the number of first-time buyers moving into smaller homes in Davis this year.
“These are buyers who can afford homes at current prices an interest rates. It’s a very positive sign for real estate. When first-time buyers move into these lower-priced properties, they begin to build equity over time. Their families increase in size, and they move up (to a bigger house). We’re building the base for another strong real estate market” a few years down the road, he predicted.
— Reach Jeff Hudson at [email protected] or (530) 747-8055.