Will Sonoma County home prices rise or fall in 2011?

The Press Democrat spoke to three economists and two foreclosure experts for their outlook on the coming year.

Their thoughts come as the county’s median home price has hovered for almost a year between $340,000 and $370,000. The median price — the point at which half the homes sell for more, and half for less — remained far below the record of $619,000 set in August 2005, but higher than the market bottom of $305,000 reached in February 2009.

None of the five experts is predicting boom or bust, but they do differ somewhat on what lies ahead.

Read their thoughts and then feel free below to share your comments on what you think will happen to the housing market this year.

EDUARDO MARTINEZ, senior economist with Moody’s Analytics in West Chester, Pa., predicts the county’s median home price will fall 5 percent by the middle of the year.

A key reason is that homebuyers no longer receive the benefit of state or federal tax credits.

Even so, he said, the county’s housing market is expected to fare slightly better than the state and nation.

“For California we’re predicting a decline of about 8 percent,” said Martinez, who regularly publishes reports on the economy in Sonoma County and other metropolitan areas. Moody’s expects U.S. home prices to fall 6 percent during the first half of the year.

Martinez doesn’t foresee a big increase in interest rates, especially not in the first half of the year. But job growth should begin to accelerate after midyear.

A year ago many buyers “felt squeezed out” of the market either by intense competition for lower-priced homes or by concerns they might lose their job, he said.

But “with better job prospects and with lower prices, it’s going to pull those discouraged buyers back into the market,” he said.

JAMES MADISON, a Santa Rosa real estate agent who specializes in foreclosure sales, thinks home prices will rise 1 to 2 percent this year.

“I don’t think it’s going to be a lot,” said Madison, who was the county’s top real estate agent by sales and dollar volume last year, as well the 10th top agent by sales in the entire U.S. in 2008.

“I think that will probably be the case for the next few years, not just this year,” he said.

The only factor that could cause prices to tumble would be “if the banks start flooding the market” with homes they have taken back in foreclosure, Madison said. But in recent years bankers have demonstrated their intention to limit the number of homes they put on the market.

“They’ve got their finger on the throttle and they know exactly what they are doing,” said Madison, an agent with Coldwell Banker.

The housing bubble took years to produce and it will take a few more years to clean up. For 2011, he said, “we’re just going to slowly walk out of the woods. It’s not going to be glamorous.”

ROBERT EYLER, chairman of Sonoma State University’s Economics Department, said home prices will likely rise this year in Sonoma County but the increase will be in the single digits.

“The housing market is likely to get better as interest rates creep up and the demand side of the market begins to move, based on rising expectations about incomes and employment (which seem to be happening) and the expectation that there will be a need to get in the market while the getting is good,” he said in an e-mail interview.

Interest rates may inch up due to consumer demand and an improving economy, but “they are unlikely to skyrocket upward short of a major credit crisis.” He does not foresee such an event but rather expects to see a “relative good year” for the credit markets.

“We are just starting to see an emergence from a historic contraction in real estate and there should be some good signs (though not rocketing changes upward) in 2011,” he said.

SEAN O’TOOLE, founder and CEO of ForeclosureRadar in Discovery Bay, predicts housing prices will fall 5 to 10 percent in California this year as the housing market experiences “something of a double dip.”

He foresees less demand for homes because so many buyers accelerated purchases last year to take advantage of tax credits and historically low interest rates. Without such favorable incentives or a significant boost in personal incomes, he said, “prices have to adjust downwards.”

He noted that about 25 percent of California homeowners owe more than their homes are worth and 9 percent aren’t paying their mortgages.

“We have a ridiculously low number of foreclosures given how many people aren’t making payments right now,” O’Toole said.

State and federal governments have found ways to delay foreclosures, he said. But he doubts that will help matters in the long term.

“If we want a growing economy, we’ve got to clean out the problems,” O’Toole said. “Twenty-five percent negative equity is a big problem.”

ROBERT KLEINHENZ, deputy chief economist for the California Association of Realtors, predicts the state’s median home price will rise 2 percent this year.

“I actually see the second half of 2010 and all of 2011 being the transition period for the housing market,” Kleinhenz said. The homebuyers tax credits have ended, “so the market’s going to have to move forward on its own power.”

“The general economy has probably turned a corner but it’s done it very slowly,” he said. Interest rates may increase slowly but should remain near historically low levels this year.

County sales likely were down last year about 9 percent from the level in 2009, he said. Sales “will probably be about the same in 2011 as in 2010.”

California could continue to “see more softness” in prices for more-expensive homes, particularly over $750,000.

“We have tended to see more price appreciation in low-end markets and less price appreciation in high-end markets,” Kleinhenz said. “I think that trend will continue in 2011.”