County's housing market is still in flux

YAKIMA, Wash. -- While Sean Brinton was completing his Army basic training last summer, his wife, Sunset, found a 1,400-square-foot, three-bedroom house in Gleed that she loved.

The asking price was $180,000. At the time, the couple believed they could afford homes in the $150,000 price range, said Sean Brinton, 24.

But by January, taking advantage of a buyer's market, the couple purchased the home for $160,000 and even had $5,000 in closing costs paid for by the owner. A rock-bottom interest rate of 4.125 percent made it even more affordable.

"I'm pretty surprised that we could get into this home (for) as little as we did, especially considering the condition and the location," Brinton said.

Yakima County has seen a drop in home sale prices over the first two months of the year. The average home price for January and February was $142,720, down 12.1 percent from the same period a year ago, according to Headwaters--The Source, a Selah-based firm that tracks Yakima County real estate sales.

"It is kind of a reminder (that) we're still not back to normal," said Ken Nelson, broker of DK Bain Real Estate Inc. in Sunnyside.

An increasing number of foreclosed homes on the market has been the primary driver of dropping sales prices.

Concerns amid the national robo signing scandal, where banks claimed they signed off on foreclosure documents without verifying information, slowed down the foreclosure process for many of these homes in the past few months, said Glenn Crellin, executive director of the Washington Center for Real Estate Research at Washington State University.

But now the homes are making their way to the real estate market, creating price pressure on nonforeclosed homes, Crellin said.

In the first two months of 2011, Yakima County had 63 real estate-owned, or REO, homes, which are foreclosed homes repossessed by the bank and eventually put up for sale, according to RealtyTrac, an Irvine, Calif.-based firm that tracks foreclosures.

That's nearly double the number of REOs for the first two months of 2010 and more than triple of the number in 2008.

"We're seeing some of these foreclosures at 60, 70 percent of their value, because (banks) want to dump them," said Daniel McLaughlin, owner and broker for The Buyer's Agent in Yakima. "They're being bought below market value and it's really affecting other homeowners because that below-market sale is used as a comparable sale."

Foreclosed homes are also affecting the total number of homes on the market, another driver of sales price.

By the end of 2010, the Yakima County real estate market had an 11.3-month supply, compared to a seven-month supply a year ago, according to the latest data from the Washington Center for Real Estate Research at WSU.

With more homes on the market, local agents said home sellers have had to accept a lower asking price if they want their home to sell in a reasonable period of time.

A motivated seller may be willing to cut the asking price by as much as 10 percent, said Mike Kokenge, owner of Coldwell Banker Associated Realtors.

And newly constructed homes, which generally sell at higher prices than existing homes, also continue to cripple the market.

In February, new home sales nationwide dropped by 28 percent from a year ago, according to seasonally adjusted figures from the U.S. Commerce Department.

In Yakima County, there were just six new construction home sales in January, half the number sold in January 2010.

Another driver of sale price is the number of buyers looking for homes.

Many in the real estate industry say most potential buyers took advantage of either an $8,000 first-time homebuyer tax credit or a $6,500 tax credit for repeat buyers last year.

"I think the general perception is that the homebuyer tax credit accelerated the timing of purchases rather than bringing new folks that were expected to stay long-term in the rental market," said Crellin of the Washington Center for Real Estate Research.

The credits expired Sept. 30 for most buyers. But President Barack Obama agreed to extend the tax credits to April 30 for those who were serving in the military overseas for 90 days or more between Jan. 1, 2009, to April 30, 2010.

The extension gave Brittnie and Andrew Potter an $8,000 first-time homebuyer tax credit when they purchased their south Yakima home in January.

Andrew Potter, 24, served in Iraq from August 2008 to August 2009. With the couple's second child due last summer, the Potters decided to purchase a larger home rather than continue to rent.

"We wanted to put money into something that we would keep," said Brittnie Potter, 22.

They purchased a 2,300-square-foot, four-bedroom home for $125,400, well below the home's assessed value of $147,000 and several thousand below the initial listing price.

That surprised the couple, who were looking at homes in the $170,000 to $200,000 range.

"It turned out to be a really good deal for us," she said.

While a drop in prices is good news for the buyer, it's tough for sellers.

Mike and Gloria Munly listed their parents' house after the death of Gloria's father in December. They priced the west Yakima home at $157,500, just under the current assessed value of $158,000.

They felt the price was competitive, especially because they repainted the house and replaced the furnace to make the home move-in ready.

They expected to sell the house with a full-price offer.

What they did not expect was just one offer, $12,500 below their asking price.

"It was a rude awakening," said Mike Munly, 63.

But with the house paid off, they decided to keep the listing price as is and let the house sit for several months, if necessary.

"When you see value in the home, you don't want to hand it over and give it away, said Gloria Munly, also 63. "It's a family home, I'm real hesitant to have someone buy it and flip it."

While the decline in prices is painful for sellers like the Munlys, many believe they are necessary for the market to recover in the long run.

The lower prices will attract more buyers, causing many local markets, including Yakima, to see an increase in sales volume before prices begin to turn around, said Ken Fears, director of regional economics for the National Association of Realtors.

With low interest rates and perceived pent-up demand, local agents believe improvement will come in the coming spring and summer months.

"We're still selling," Kokenge said. "Our best months are coming. Once the weather breaks (in spring) and people's yards are cleaned up; they'll start coming out."

* Mai Hoang can be reached at 509-577-7685 or maihoang@yakimaherald.com.