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In Focus: Housing market level, steady

This house on J Street is just one of the several for sale in Del Norte County. Local real estate agents report that the housing market is continuing to level. (The Daily Triplicate/Bryant Anderson).
This house on J Street is just one of the several for sale in Del Norte County. Local real estate agents report that the housing market is continuing to level. (The Daily Triplicate/Bryant Anderson).

By Cornelia de Bruin

Triplicate staff writer

After taking real estate agents and their clients through several buying and selling cycles, the housing market in Del Norte County has continued to level during the first half of the year.

"We have leveled, but we are holding steady," said Patti Beesler, a Realtor with Ming Tree Realty for the past six years. "There's no more buy and flip because the big gain when you sell, or the big rent on rentals is not there."

Six months ago, when looking at the market, Beesler invoked the image of a tsunami in the real estate world by likening the past three years to a four-wave cycle during which buyers would quickly sell their recent property acquisitions to sellers, who would sell them to newer-to-the-market sellers, and so on.

The 3 percent difference in average sale prices between 2006's $238,500 and 2007's $266,500 indicates the calmer period to which Beesler refers.

In reaching the figure, she excluded the sale of a $1.3 million home built in the Spyglass subdivision near Smith River.

"It skews the statistics," Beesler said.

The market has slowed, agreed John DeGemis of Redwood Coast Realty.

"It's a little slower than we would like," he said. "Outside forces affect us; the outside money is not coming here because their prices went up fast and aren't moving so much now."

He referred to Southern California and Las Vegas, Nev. – the latter now the nation's foreclosure capital.

Statistics aside, Beesler said Farmer's Home Administration's decision to resume its loans to buyers of manufactured homes is "the best news here."

That's because FHA requires only 3 percent down from buyers to whom it lends.

The federal organization decided not to issue such loans about two years ago.

At that time, Beesler said FHA would only loan to buyers of properties that were "not a fixer-upper."

"Now if it passes an appraisal for its soundness, they'll loan," Beesler said. "That also goes for ‘stick built'", or homes built on site.

Beesler said that 100 percent financing is also available to some Del Norte County buyers. The combination, added to the stringent requirements of potential buyers and "relaxed" requirements of properties "meets Del Norte County's needs."

"We're seeing more first-time buyers because the sellers are paying closing costs," Beesler said. "It's kind of a nice change."

The advantage to a buyer of a seller's willingness to pay the costs is that it can lower the buyer's monthly loan payment. The longer-term savings to the buyer often seals a sale, Beesler said.

After the wild ride of the past three years, however, the "leveling market" does not indicate that it's flat, Beesler said.

"The $600,000 buyers are gone and the $500,000 buyers are rare, but we're still selling homes in the $350,00 range quite easily as long as there's value for them," Beesler said. "Buyers just have to buy and hold a property for three to five years."

And holding is exactly what those buyers are doing, she said.

Del Norte Home Sales

2nd Qtr. 2006

•Average days on market 2006: 131

•Average sale price 2006: $238,451.56

2nd Qtr. 2007

•Average days on market 2007: 209

•Average sale price 2007: $266,500

SOURCE: Patti Beesler, Ming Tree Realty

Paying points: A useful home marketing tool

As the Del Norte County real estate market levels out, some real estate agents are using a marketing tool that many buyers have never heard of: Paying points.

Obscure to some as the term may be, the points tactic gives sellers a chance to stand out from the competition, and even better, both buyers and sellers benefit from it.

Points translates in the seller's case to buying down their buyer's interest rate on a loan, thus making it easier for them to pay for it. A seller who will buy points for a prospective buyer can find that the offer is the nudge needed to prompt the buyer to ante up and commit to the the purchase.

In a market that's leveling, as the Del Norte real estate market is, sellers face a choice of holding on to their properties for a long time or sweetening the pot to convince a buyer to purchase it.

It's not cheap for a seller to lower a buyer's interest rate, but offering to do so costs the seller less in the long run than lowering the sale price.

The expense of buy-downs, the trade term for purchasing points, come from the seller's bottom line – not typically a popular place from which to carve out a chunk of cash. But besides getting a seller into the home quickly, the buy-down gives the seller "that intangible ‘I got my full price'" satisfaction, said Patti Beesler, a Realtor with Ming Tree Realty.

Best of all, it's cheaper for the seller to trim his bottom line than it is to take a financial hit by lowering a home's purchase price.

The buyer benefits from the lowered interest rate via the amount of the payment. But buyers need to fully understand the points concept in order to decide which type of points buy will help them the most.

If the buyer doesn't plan to own the property for the full length of the mortgage, he or she won't realize the entire value of the buy-down. Buyers who plan to move or sell their home within the first five years of purchase would benefit more from a 3-2-1- or 2-1 buy-down arrangement"

•3-2-1 – The interest rate is brought down by 3 percentage points below the market for the first year, 2 points for the second year and 1 point for the third.

•2-1 – Similar to 3-2-1 but shorter. The rate is brought down by 2 percentage points the first year and 1 point the following year.

In both cases, the interest rate returns to its original percentage after the reduction ends.

How Paying Points Works

•Option 1

At 8 percent interest, the buyer's payments are $733.76 each month for 30 months.

•Option 2

The seller offers to buy two points worth 1/4 of 1 percent. The interest rate drops to 7.5 percent and the loan payment is reduced to $699.21.

•Option 3

The seller buys 3 points, again worth 1/4 of 1 percent each. The interest rate drops to 7 percent and the loan payment is reduced to $665.30.

Foster urged buyers who are considering such an arrangement to check the worth of the points with the bank involved in the transaction. Some banks value points at 1/4 of 1 percent, while others drop their value to 1/8 of 1 percent. The interest paid is tax-deductible for the owner of the loan.

 
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