Editor’s note: This report on the Fresno market is an excerpt from a special report by Inman News reporter Andrea V. Brambila, "10 Prime Real Estate Markets for First-Time Buyers," identifying the 10 metro markets with the greatest share of first-time homebuyers relying on mortgages backed by the Federal Housing Administration (FHA) in 2011. 

When public defense attorney and first-time homebuyer Sergio Benavides decided to buy a home in Fresno after years of renting, his main concern was getting conned.

"I’m an attorney, and I read a lot. I know how the economy was destroyed by the housing market, and I did not want to be just another victim," he said.

Benavides obtained financing for his purchase through his local credit union, which he felt would have his best interests in mind, and chose an FHA loan.

"I felt that with an FHA loan, I could secure a loan with a minimal down payment, and I welcomed additional government regulation and control over such a loan. I felt safer," Benavides said.

Nearly 29 percent of sales in the Fresno market went to first-time buyers with an FHA loan in 2011. FHA buyers overall accounted for nearly 36 percent of sales.

Fresno, Calif., metro area
Population estimate (2011):  942,904
% of total sales to first-time buyers with FHA loans (2011) 28.8%
Median sales price for new and existing homes (Q1 2012): $135,000
Median sales price drop from peak: -56.0%
Total home sales (2011): 11,057
% chg. total sales (2011 vs. 2010) 4.3%
% of area homes sold affordable to median-income families (Q1 2012) 82.3%
Unemployment rate (March 2012) 17.4%
Walk Score: 49

Paul Knebel, senior loan officer at Guarantee Home Loans in Fresno, estimates that 90 percent of his first-time buyers have chosen FHA financing so far this year, while only about 5 percent have chosen conventional loans.

"Average hourly wages or monthly salaries are lower than other markets, so first-time buyers may take longer to save for down payment and closing costs," Knebel said.

At nearly 1 million residents, Fresno is the largest Central Valley metro featured in this report. The metro had a 17.4 percent unemployment rate in March and its job market is expected to grow 1.7 percent in 2012, on par with the nation as whole, but not nearly enough to substantially reduce its jobless rate.

In the first quarter, the Fresno area had the 12th-highest foreclosure rate in the nation: 1 in 92 housing units received a foreclosure filing. Nearly half of its sales in the fourth quarter, 48.9 percent, were REOs or short sales.

Nevertheless, as in the Merced market to the north, foreclosure activity has pushed prices down, leading to a rise in affordability, which Knebel said has kept first-time buyers at a high share of the market — about 50 percent in the last year.

Home prices in the Fresno area peaked in second-quarter 2006 with a median sales price of $307,000. As of the first quarter of this year, that median had dropped 56 percent, to $135,000.

That same quarter, 82.3 percent of Fresno-area homes were affordable to families earning the area’s median income, $55,500.

"We have some of the lowest prices in California, and a huge percentage of buyers can afford it. With minimal down such as FHA, it can still be less than paying rent," said Tom Avent, a broker associate with Guaranteed Real Estate in Fresno. Avent was Benavides’ agent.

For Benavides, 42, affordability was definitely a factor.

"The market rates were low, I had savings saved up, and it wasn’t a big difference from renting to owning," he said.

Benavides had been living in a one-bedroom apartment in The Tower, which he described as "a picturesque, old, nightlife/arts neighborhood near downtown Fresno."

But his building dated from 1927, and it showed, he said.

"The roof leaked, it lacked enough electrical outlets, and had single-pane windows, and poor air circulation. The cuteness of the place wore off, and I was ready for modern everything, to make life easier and more comfortable," he said.

At the beginning of March, he closed on a four-bedroom, 1.75-bathroom home at a sale price of $142,500.

"It is just for me, and possibly one roommate. If I relocate (and I intend to), I plan on renting it out. It is so attractive that I don’t think it should be too difficult to rent," Benavides said.

He found his agent, Avent, while searching for homes online.

"His name was attached to the property I wanted online. I emailed him, and he replied lighting fast," Benavides said.

According to Avent, over the last two years, 52 percent of his clients were first-time buyers, 33 percent were investors, and 15 percent were move-up buyers. Most of his first-timers were couples or singles in their mid-20s to early 30s.

"First time buyers’ main concern is the down payment amount and the monthly payment, and most of them ask for (seller) contributions towards their closing costs. I don’t see this with investor clients or repeat buyers," Avent said.

Nearly 4 in 10 first-time buyers with FHA loans in the Fresno market obtained down payment assistance in 2011.

Nonetheless, Knebel said he was seeing fewer first-time buyers with poor credit compared to a few years ago.

"I think they are more proactive on their credit before approaching a lender. (Their) debt-to-income (ratios are) better than a couple of years ago," he said.

Fear of negative equity with a small down payment is also not a big issue.

"Buyers (are) looking at property more as a home for their family to enjoy instead of a financial investment vehicle to make money," Knebel said.

In the Fresno market, prices are somewhat stable — the first quarter’s median sales price dipped 2.9 percent on an annual basis, compared with a 1.8 percent slide at the national level. Overall sales in the Fresno area rose 4.3 percent in 2011, however, compared with a 6.7 percent drop nationwide.

"Our market is currently quite competitive and active, and I see this every time I write an offer, because there is typically multiple offers on properties that can be financed," Avent said.

"I’m seeing much more buyer activity in 2012, which is reducing our inventory, and it creates a frenzied auction-like atmosphere for many sales. We need more listings in our market to have some balance," he added.

Fresno, Calif. Metro U.S.
% of total sales to first-time buyers with FHA loans (2011) 28.8% 15.3%
% of total sales to overall buyers with FHA loans (2011) 35.7% 20.1%
% first-time FHA buyers receiving down payment assistance (2011) 38.4% 27.8%
Median sales price for new and existing homes (Q1 2012): $135,000 $162,000
Median sales price % change (Q1 ’11-Q1 ’12) -2.9% -1.8%
Time median sales price peaked: Q2 2006 Q4 2005
Peak median sales price: $307,000 $254,000
Median sales price drop from peak: -56% -36.2%
Total home sales (2011): 11,057 3.78 million
% chg. total sales (2011 vs. 2010) 4.3% -6.7%
Population estimate (2011) 942,904 311.6 million
Sales per population (2011) 85 82
Median family income (Q1 2012) $55,500 $65,000
% of area homes sold affordable to median-income families (Q1 2012) 82.3% 77.5%
% chg. affordability (Q1 2012 vs. Q1 2011)  5.9% 3.9%
Unemployment rate (March 2012) 17.4% 8.4%
1-year forecast job growth (Q4 2012 vs. Q4 2011) 1.7% 1.7%
% foreclosure sales (Q4 2011) 48.9% 23.7%
Foreclosure activity rate (Q1 2012) 1 in 92 units 1 in 230 units

For access to the full report, see: "10 Prime Real Estate Markets for First-Time Buyers."

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