Bargain Buyers Drive Up Home Sales

Oct. 28, 2008— -- With home prices falling, Martin and Dorothy Christon of New York decided now is the time to buy. The couple wants to move to Northern Virginia to be near their children and grandchildren.

We are buying "because of the price reductions," said Martin Christon. "There are so many houses on the market, and now they are half price or less, even, than two years ago."

Sales in Prince William County, Va., have bounced up 235 percent from a year ago. Buyers are attracted to homes that are selling for low prices, sometimes for less than the cost of building.

A house in Corona, Calif., that once sold for $550,00 was snapped up by real estate investor Wesley Isaac for just $250,000 at auction.

"The bounce in sales is fundamental because the teacher can now buy in an area where they couldn't buy before," said Isaac. "It's because other people that were shut out of the last market are now saying, 'I can buy and I can afford the payment.'"

According to figures compiled by the Wall Street Journal, the glut of homes for sale has been reduced dramatically in some areas. In Sacramento, Calif., the number dropped by 32 percent, and Orange County, Calif., saw a drop of 27 percent, Boston, Denver and Los Angeles were all down 21 percent, Dallas and Houston all saw the number of homes for sale drop about about 14 percent.

While the rise in home sales is promising, it might not be enough to turn the market around. Thousands of foreclosed and bank-owned homes are still being dumped on the retail market, continuing to drive down prices.

"We have over a million bank-owned homes in the market by the end of the year," said Rick Sharga, vice president of Marketing at Realty Trac, Inc. "That's between 25 and 30 percent of inventory out there, and until we burn through that, the market is simply not going to have a chance to stabilize and get healthy again."

The Christons may have entered the market at the very beginning of a trend.

"The prices are realistic," Martin Christon said. "These are prices that we would have paid in New York State 25 years ago."

But it will take many thousands of buyers like them to help the housing market find the bottom and begin to crawl back up.