The L.A. Times real estate section on Sunday carried a story about a surge in sales of bank-owned properties, primarily in the Inland Empire. Prominently featured were Aimee and Cory Brown, who snapped up an REO in Murrieta.
“We ended up making an offer on a short sale in March, but since those take a while, we kept looking,” Aimee Brown said. “Four days later, I found a four-bedroom, 2 1/2 -bath house for $225,000 online. It was a bank repo and had eight other offers, so we offered $250,000 and got it.”
I’m pretty certain this is the house the Browns bought. It’s a four-bedroom, three-bath in 2,100 square feet, and the road-view photo on the Redfin listing looks just like the picture in The Times, plum tree and all.
Did the Browns get a good deal? The house, built in 1998, was last sold in 2007 for $360,000; the Browns got it for $255,000 (the story says $250,000; maybe closing costs were financed). That means the Browns bid more than 10 percent above the asking price.
According to the Redfin database, 59 homes have changed hands in the last three months in Murrieta ZIP code 92562: average price, $250,000; average square feet, 1,874. So it would appear that the Browns are in the ballpark. A similar house to the Browns’ would cost around $1,700 a month to rent, so the rent ratio is 12 — very buying-favorable.
Will prices come down more? That’s the question everyone wishes they had the answer to. Here’s what John Karevoll of DataQuick Information Systems had to say on the subject:
“The big question is whether we’re in a recession,” he said. “If we are, we’re in for some more downturn. If we’re not in a recession, it’s likely that prices have found their bottom and that most of the declines are behind us. That’s true for REOs and the market as a whole.”
I agree that prices in the Inland area may be close to the bottom, but the continuing unaffordability, high inventory, and small percentage of bank-owned homes on the market in L.A. and Orange counties tells me that prices must fall further before buyers will venture back in.
Also, with gas prices the way they are, moving to a far-flung suburb and commuting is a considerably less attractive option than in years past. Decreased demand for inland homes could push prices down more.
And if history is any indicator, once prices do hit bottom, they won’t immediately start going up. They’ll bump along, perhaps for years, until inventory dwindles and rents and personal income rise to the point that home-owning makes sense again.
What do you think? What are you seeing out there?