By Elliot Spagat Associated Press
SAN DIEGO — Robert and Emerald Oravec were itching to sell their condominium late last year to move closer to a favorite surfing spot, but they were stuck. They owed the bank $194,000 and figured the most they could get was $180,000.
When they put their San Diego home up for sale in May, it sold for $260,00, allowing them to invest profits in a new home that’s more than twice the size on a large lot and 40 minutes closer to the surfing beach.
“We’re stoked,” said Robert, 50, a facilities engineer at Solar Turbines Inc., a maker of gas turbines that has employed him for the last 22 years. “It was better to be patient and wait it out.”
Soaring prices are leaving fewer homeowners owing more money than their properties are worth, bringing them off the sidelines of the nation’s surging housing market and offering relief to buyers who are frustrated by bidding wars. As more homes go up for sale, price increases are expected to moderate.
Mark Fleming, chief economist at real estate data provider CoreLogic Inc., calls it “a virtuous circle.”
“The fact that house prices have increased so dramatically … has unlocked a lot of that pent-up supply,” said Fleming, whose firm found that markets with the largest percentage of “underwater” or “upside down” mortgages often have the lowest supply of homes for sale.
From January to March, 19.8 percent of the nation’s mortgaged homes were underwater, down from 23.7 percent a year earlier and 25 percent during the same period of 2011, according to CoreLogic. Gains spread across the country, though regions that rose high and crashed hard remained saddled with homeowners who bought near the peak.
Nevada had a nation-high 45.4 percent of mortgages underwater, followed by Florida at 38.1 percent and Michigan at 32 percent. Montana had a nation-low 5.6 percent.
Housing inventories remain unusually low. There was a 5.2-month supply of existing, single-family homes for sale in May, compared to 6.4 months a year earlier, according to the National Association of Realtors.
California had only a 2.6-month supply, compared to 3.6 months a year earlier and well below the six months that is considered a balanced market.
San Diego broker Colleen Cotter began knocking on doors this year after scouring property records to find homeowners who didn’t owe money. If someone answers, she makes an all-cash bid on behalf of investors who don’t even visit.
Nearly one of three homes sold in Southern California is paid for in cash, putting borrowers at a disadvantage. Some buyers write sellers about how they would cherish a home, hoping to spark a personal connection.
Josh Martin, 26, discovered homes he and wife considered buying had changed hands less than a year earlier at much lower prices. The first-time homebuyers lost nine bids since August— many to cash buyers — until finally landing a home in May for $250,000 in the San Diego suburb of Chula Vista.
“It was very stressful because the prices just kept going up,” said Martin, who recently left the Marine Corps. “Our lease was about to end and we didn’t want to sign another year.”
Economists expect many homeowners will continue to resist selling because they think they can profit more by waiting.
Nancy Randazzo, a 38-year-old public school teacher who owes about $240,000 on an Anaheim condominium that she bought for $335,000 in 2005, figures she might be able to sell for what she owes but wants to rent to Disneyland tourists. One potential snag is that she and her fiancee would need to find a place to buy.
“Prices are going up so fast that I don’t know if I can,” she said.
The huge price increases produced an unexpected retirement gift for Larry and Diane Plaster, who were resigned in January to selling their San Diego home for less than they owed the bank, known as a short sale. They owed $352,000 but accepted an offer for $290,000.
Their bank rejected the deal four months later, leading the couple to put the home up for sale again. On the second attempt, they took an all-cash offer of $380,000, yielding a windfall of $6,500 after broker fees and closing costs. The Plasters, who live on Social Security income, fulfilled a dream of moving to a geodesic dome they built in Janesville, 130 miles north of Lake Tahoe.
The former Catholic social service workers were so angry when Chase rejected the short sale that they closed their account after more than 40 years.
“Now I guess I should send them a thank-you note,” said Diane, 66.