Real Estate Information Archive

Underwater homeowners who’ve been stuck between entering a short sale and waiting for an upturn in the housing market may finally have an opportunity to break even or profit over the next year in the Coachella Valley, housing experts say.

The California housing market will coast through a steady recovery into the next year, buoyed by rising median home prices and a drop in distressed property sales, according to a 2014 market forecast released Tuesday from the California Association of Realtors.

“The share of equity sales has increased sharply,” Leslie Appleton-Young, chief economist for the association, said during a conference call for reporters. “That illustrates what a housing recovery looks like.”

In 2009, 60 percent of home sales in California were bank repossessions, but they now total 5 percent of all sales, Appleton-Young said. Foreclosed homes have shuttled through the pipeline, easing the market from heavily distressed property sales to a robust spike in equity sales.

The forecast projects 444,000 homes sold next year across the state, a 3.2 percent gain from the 430,300 sales estimate for this year. The California median home price is expected to reach $408,600 this year, up 28 percent from 2012. The price is expected to inch up to $432,800 in 2014, according to the forecast.

The Coachella Valley has mirrored the state’s upward trend. In August, the median home price rose 25 percent from the year before to $250,000, according to DataQuick, a San Diego-based firm tracking real estate data.

The spike in prices may persuade more underwater homeowners to put their home on the market, housing experts said. More listings trickling in will help expand the current three-month inventory shortage. A normal supply is six to seven months, Appleton-Young said.

“Property owners who were underwater on their housing may now be above water because their home has appreciated over the last couple of years, so that represents a supply of inventory coming onto the market,” Appleton-Young said. “When rates change, it causes people to get off the fence.”

The decline of distressed property sales indicates that more people are buying homes through conventional transactions, housing experts said. Cumulatively over the past six months in the Coachella Valley, 83 percent of home sales were equity purchases, with 9 percent short sales and 8 percent bank repossessions, according to data from the California Desert Association of Realtors.

Coachella Valley underwater homeowners who owe more on their mortgage than the value of their house may take longer to regain equity than the rest of the state because the region tumbled into a deeper housing bust, said Daren Blomquist, vice president ofRealtyTrac, an Irvine-based real estate data firm.

The regional market lags behind the state because it’s largely based on second home purchases. About 29 percent of homes in Riverside County are underwater, higher than the 23 percent figure for the state overall.

“Homeowners (in the Coachella Valley) have a deeper hole to dig out of when being underwater,” Blomquist said.

Small opportunities, however, still exist for underwater homeowners. Rising home prices will create a stable market for people wanting to sell their homes, said Jenell Fontes, a luxury real estate agent and short sale specialist based in Rancho Mirage.

“Some of them list pretty high, as they’re coming out on the market,” Fontes said. “Some are just waiting it out. Now, they’re only up to their neck underwater, and they’re just treading.”

Business reporter Dominique Fong can be reached at (760) 778-4661, dominique.fong@thedesertsun.com and on Twitter @dominiquefong.

Lou Weaver was one day away from closing on buying a new home in south Palm Springs, until the partial government shutdown shuttered the federal agency he needed to sign off the sale.

As long as the Bureau of Indian Affairs remains closed during the partial government shutdown, Weaver can’t get furloughed federal employees to approve his purchase — a must for all Indian lease land and usually the last box to check off for a property in escrow.

The shutdown this week threw buyers and sellers of Indian lease land into a limbo across the Coachella Valley, leaving hundreds of thousands of dollars hanging on pending property transactions.

“It’s very much affecting me,” Weaver said. “It’s quite a complicated procedure. I had most of the signatures [from the Bureau of Indian Affairs], all but one on Sept. 30.”

About half of Palm Springs lies on Indian lease land. Homeowners and commercial businesses, with the approval of the Bureau of Indian Affairs, can lease the buildings on that land for a period of time.

Currently there are 123 active listings on lease land in the city, with 38 sales pending, according to real estate data from the Palm Springs Regional Association of Realtors. Sales in active escrow are now frozen.

If the standstill continues over the next month – the last federal government shutdown dragged on for three weeks in 1995-96 – some mortgage loans locked at a fixed interest rate could expire, forcing buyers to reapply for a potentially higher rate and resubmit financial records.

The Bureau of Indian Affairs office off North Gene Autry Trail stayed open late Monday and for part of Tuesday morning to process property transfers and deed trusts, real estate experts said. The bureau won’t issue any more land titles and records or approve new documents until Congress reaches an agreement on the national budget, according to a memo the bureau circulated Tuesday.

Sandy Edelstein, a senior loan officer for Prospect Mortgage who frequently handles Indian lease land loans, said the bureau approved several of his clients’ loans last-minute before the shutdown. Edelstein typically closes between five and seven loans on Indian lease land every month in Palm Springs. Four loans will probably be delayed this month, he said.

“It’s frustrating for everybody,” Edelstein said. “People’s rate locks can potentially expire.”

A loan interest rate stays locked from a week to a couple weeks, depending on the mortgage lender. Edelstein drew loan documents for clients in September, papers that expire Oct. 10. After that date, clients will have to submit documents again and sign a new loan. An extension usually requires a fee based on a percentage of the property sale, but he’ll try to reduce or waive the fee for his clients, Edelstein said.

“This is truly one of those things that was unforeseen and out of anybody’s control,” Edelstein said.

Julie Ekstrom, an escrow officer for CV Escrow, said she’s been bombarded by emails from her clients wondering about the shutdown. About a third of her clients are in escrow for properties on Indian lease land in Palm Springs, she said.

“I think given the big picture, they’re understanding,” Ekstrom said. “But I can’t say that they’re happy. A lot of people who are frustrated, those who are getting loans on those properties, they stand to lose their interest rates.”

Buyers can’t move in and sellers can’t close, said Maryellen Hill, a real estate agent who runs her own firm, Maryellen Hill & Associates. Hill said she has two clients in escrow. One was supposed to close Monday; the other, in late October.

“All we do is just wait to hear what happens on the news that we don’t have a shutdown of the government anymore,” Hill said.

The shutdown also affected pockets of Indian lease land elsewhere in the Valley.

Ed Park, one of Edelstein’s clients, said he was supposed to close Friday on a $389,000 home in the Mission Hills Country Club of Rancho Mirage. Park had been wanting to move from his condo into a larger place.

Now, Park can only wait. If the shutdown continues, he risks losing his loan, or pay a $1,500 extension fee that he hopes can be waived. Drawing financial documents for his initial loan, including credit card history and bank statements, was a lengthy process lasting two to three weeks.

“We’re in limbo now,” Park said. “We don’t have any idea when this is going to end.”

Business reporter Dominique Fong can be reached at (760) 778-4661, dominique.fong@thedesertsun.com and on Twitter @dominiquefong.