Slumping Market Logs Casualties

First it was Alliance and Old Republic title companies. Today
it’s Century 21 Premier.
 
Morgan Hill – First it was Alliance and Old Republic title companies. Today it’s Century 21 Premier. 

One of South County’s leading real estate agencies shuttered its Gilroy and Morgan Hill offices today, the latest casualty in a market that has seen a rash of foreclosures and plummeting home sales. 

And while loan officers and real estate agents say the market is weeding out peers who are faint of heart or dishonest, they predict business will not improve any time soon. At least not for sellers. 

“I think we have two to three more years of a buyer’s market,” said Susan Jacobsen, who works for Starritt Realtors in Gilroy.

For too long, she said, “people were out there using homes like an ATM” – borrowing more than they could afford, putting up little or no money, and leveraging any equity they built to borrow even more.

The wreckage of that climate persists in South County, where foreclosures abound and homes idle for months without a buyer, according to figures from multiple listing service RE InfoLink and the Santa Clara County Association of Realtors.

Median home prices in Morgan Hill dropped to $858,000 in July, compared to $1 million for the same month last year, according to the MLS. In Gilroy, homes prices dropped to $675,000 in July, compared to $725,000 for the same month last year. Similar to its neighbor to the north, Gilroy has seen an increase in the number of homes on the market. But the biggest change in both cities involves the length of time it takes to sell a home.

In July 2005, single homes in both cities sold in less than 30 days on average, according to the RE InfoLink figures. This past July, that average stood at 80 days in Gilroy and 62 in Morgan Hill.

Century 21 set loose more than 90 employees on the market, most of them likely to be snapped up by competing companies such as Intero Real Estate. 

The closure of the Century 21 office won’t dent the local economy unless agents skip South County for other areas, said Larry Cope, director of the Gilroy Economic Development Corporation, who likened the exodus to the dot-com bubble bursting in 2001. 

“The old economic rule, unfortunately, is what goes up, must come down,” said Cope.

But a market downturn isn’t all bad news, according to Jacobsen. Leaner times mean higher standards to qualify for loans, which in turn has forced agents to find new ways to lure business. Some of the latest strategies include helping buyers use down payments to shave down long-term interest rates, and arrange for home sellers to act as secondary lenders for a buyer. The latter tactic reduces risk for skittish banks and allows more people to qualify for homes.

“Some Realtors are walking around saying our industry is going to have a little cleansing,” Jacobsen said. “You have to know how to work in this market … We’ll see some creativity coming out, and hopefully honest creativity.”