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Napa Foreclosure Sales Flood Market

Foreclosures and other distressed properties account for more than a third of all home sales, and data released today suggests that figure may soon grow even bigger.

Lenders in January took back nearly 91,100 distressed properties, which includes foreclosures and short sales, up 29% from the previous month, according to data released this morning by LPS Applied Analytics, which tracks mortgage performance.  In the next few months, experts say those homes will make their way back to the market to join the already high percentage of distressed homes being snatched up by buyers.

That addition of distressed properties will likely lead to further drops in home prices, says Tom Popik, research director at Campbell Surveys, a real estate research firm. Foreclosures and short sales accounted for roughly 35% of total existing home sales in January — up 16% from June, according to the National Association of Realtors. Over that period, the median home price fell 8.5% to $154,700. “Prices are going to continue to go down for a long time,” says Popik

To be sure, distressed properties tend to make up a greater share of overall sales in the winter when investors are the predominant buyers, says Walter Molony, a spokesman for the National Association of Realtors. Families typically purchase a home in the spring and summer before the new school year begins. And because families tend to avoid buying foreclosures, distressed properties make up a smaller market share of home sales during that time, he says.

Still, as banks reclaim more foreclosed properties and put them back on the market, experts say homeowners are likely to feel the impact of a nearby foreclosure on their own property’s value. On average, home property values drop about 1% when they’re within one-eighth of a mile from a residence that’s received a foreclosure filing, according to the Woodstock Institute, which researches foreclosures, and the Georgia Institute of Technology. When the home is sold – whether in an auction or taken back by the lender – homes within a quarter mile lose up to around 4% of their value, which they’ll need between two and five years to recoup, according to a separate study in the Journal of Real Estate Finance and Economics.

For homeowners, more foreclosure sales in their neighborhood can lead to losing home equity at a time when millions already owe more on their home than it’s worth. Less equity will make it harder to borrow against homes for renovations, repairs, or other purposes, says Spencer Cowan, vice president at the Woodstock Institute.

Real estate pros say those who want to sell will likely end up getting less for their property than they expected. That’s because they’ll be competing with foreclosed homes that sell at a roughly 29% discount on average, according to RealtyTrac.com. Of course, these homes may stand out to buyers who prefer to buy a move-in ready home or at least one that doesn’t require extensive repairs like most foreclosures do.

What’s bad news for sellers, of course, is good news for buyers. In particular, experts say the spike in foreclosures means buyers have more leverage to negotiate a price on a non-distressed sale if it’s in a market where a significant number of homes are in foreclosure. They may also be able to purchase a foreclosed home at a relatively low price (though they’ll likely have to pump money into it for repairs).

During the last quarter of 2011, foreclosure sales in Las Vegas accounted for 59% of all home sales – among the highest in the country — according to RealtyTrac.com. Those homes sold for an average discount of 19%. In Sacramento, foreclosures made up 50% of all sales and sold at a 25% discount. But while they may get a deal, buyers shouldn’t count on turning a profit quickly especially if foreclosures continue to rise in the area dragging property prices further down.

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St Helena Real Estate Vacation Homes

ST. HELENA — Short-term rentals that have flown under the radar for years soon will be able to operate legally, with the St. Helena City Council voting 4-1 this week to approve new regulations allowing city staff to issue up to 25 vacation rental permits.

The permits will be available on a first-come, first-served basis, but they won’t be available right away. The council will have to formally adopt the new ordinance at its April 10 meeting, followed by a 30-day period before it takes effect. City staff will announce when permit applications will be accepted.

The city started looking at the issue last year, after operators of legal bed-and-breakfasts complained that illegal operations were doing business without paying applicable taxes. Given the choice of cracking down on vacation rentals or strictly regulating them, the council chose the latter option.

“We’ve had this problem in our city for a long time, and this is a very good ordinance to address that problem and also raise more revenue for our city,” said Councilmember Peter White.

Councilmember Catarina Sanchez cast the sole dissenting vote. She said the regulations would take 25 units out of the city’s housing stock, drive up housing prices, and “affect the culture of our community” by allowing commercial enterprise in residential neighborhoods.

That last concern was echoed by Diane Dillon, a member of the Napa County Board of Supervisors who said she was speaking as a St. Helena citizen, not a supervisor.

“I’m concerned that this is a significant change for the city of St. Helena to allow more commercial uses in residential areas,” Dillon said. “That’s a little bit of a sea change there, and I have concerns that the residents of St. Helena might not really understand the full impacts of this.”

Dillon also brought to the city’s attention that only operations offering four rooms or more are subject to the countywide 2-percent assessment for the Tourism Improvement District, so the ordinance can’t force vacation rentals to pay that assessment. The city changed the ordinance so it only requires vacation rentals to pay the 12-percent Transient Occupancy Tax.

City councilmembers said they’ll revisit the ordinance in a year to see how it’s working. Applicants who obtain a permit during the first year will have to abide by any changes the council deems necessary after their review.

The Planning Commission spent hours mulling the details of the ordinance. The council kept some of the commission’s recommendations, but made a few changes.

One change involved how neighbors are involved in the initial application process. The Planning Commission recommended that applicants should get the written approval of 70 percent of their neighbors — anything lower than that threshold would trigger a hearing before the commission.

But the council decided to go with their original scheme: a Planning Commission hearing will only be required if 30 percent of neighbors object to the application.

Applicants will also have to give neighbors contact information for someone who can respond to complaints within 30 minutes.