La Jolla, CA---Southern California home sales rose in October as prices showed more signs of firming. The median sale price fell by the smallest amount in two years, the result of a shrinking inventory of homes for sale and government and industry efforts to stoke demand and curtail foreclosures, a real estate information service reported. Two counties – Orange and San Diego – posted modest year-over-year increases in their overall median sale price last month. It was the second consecutive gain for Orange County and the first in more than three years for San Diego. Both counties also posted small annual gains the past two months in their median price paid for resale single-family detached houses.
Last month 22,132 new and resale houses and condos closed escrow in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was up 2.8 percent from 21,539 in September and also up 2.8 percent from 21,532 a year earlier, according to MDA DataQuick of San Diego.
October marked the 16th month in a row with a year-over-year sales gain, although last month’s was the smallest of those increases. The 2.8 percent uptick in October sales from September wasn’t unusual, given sales have increased between those two months in half of the years – including 2007 and 2008 – since 1988, when DataQuick’s statistics begin. The average change between September and October is a decline of just under 1 percent.
Last month’s sales were the highest for an October since 2006, when 23,745 sold, but were still 9.5 percent lower than the historical October average of 24,458 sales. Since 1988, October sales have ranged from a low of 12,913 in October 2007 to a high of 37,642 in October 2003.
Sales increases over the last two months can be partially attributed to the recent increase in short sales, which take longer to close escrow. The result is that some summer deals that might normally have closed earlier instead closed in September and October.
Other factors driving home sales higher of late: A rush by some to take advantage of the federal tax credit for first-time buyers, which was initially set to expire at the end of this month but was recently extended and expanded. Also, mortgage rates remain extremely attractive and, combined with home price declines, have boosted housing affordability.
A critical financing source for first-time buyers purchasing lower-cost homes, especially foreclosures, has been the federally-insured FHA loan. FHA mortgages accounted for 38.3 percent of all Southland purchase loans last month, compared with 32.5 percent a year ago and just 2 percent two years ago. FHA’s share of purchase loans varied last month from 26.2 percent in Orange County to 49.2 percent in Riverside County. They offer down payments as low as 3.5 percent and relatively lenient qualifying standards.
“The government is playing a huge role in stabilizing and, to some extent, reinvigorating the housing market,” said John Walsh, MDA DataQuick president. “Its actions have triggered ultra-low mortgage rates, plentiful low-down-payment (FHA) financing, an extended and expanded tax credit for home buyers, and programs and political pressure aimed at reducing foreclosures.”
“The real question now is how well can the market perform next year as some of the government stimulus disappears,” he continued. “The more upbeat outlooks suggest a strengthening economy and job market will help pick up the slack, and that demand for lower-cost foreclosures will remain robust. The more negative forecasts assume, among other things, a much slower economic recovery, more foreclosures than the market can readily digest, and more turbulence in the credit markets.”
The latter outlook suggests today’s market stability is contrived and will prove short-lived – nothing more than a temporary price plateau – while the former suggests home prices are currently at or near bottom.
In October, the median price paid for a Southland home was $280,000, up 1.8 percent from $275,000 in September but down 6.7 percent from $300,000 in October 2008. It was the median’s smallest annual decline for any month since September 2007, when the median fell 4 percent from a year earlier. September 2007 – one month after the current credit crunch hit – marked the beginning of a 26-month streak of year-over-year declines in the median price.
The region’s overall median sale price has risen or held steady on a month-to-month basis ever since it dropped to a more-than 7-year low of $247,000 in April. Last month the median was 44.6 percent lower than the peak $505,000 median reached during several months in early and mid 2007.
Orange County logged a 3.9 percent annual gain in its overall median last month and a 1.9 percent increase in its resale single-family house median. San Diego County saw a 0.5 percent annual increase in its overall median price and a 2.9 percent gain in its median for resale houses.
Another price gauge analysts watch, the median paid per square foot for resale single-family houses, has risen or held steady for the past six months. In October it was $170 for the six-county area, the same as in September but 9.5 percent lower than a year earlier. The figure hit a low this year of $147 in April.
Recent month-to-month and year-over-year gains in the median sale price reflect, in large part, a shift of late toward foreclosures representing a lower percentage of sales. It’s mainly the result of lenders and loan servicers increasingly steering distressed borrowers into either an attempted short sale or loan modification. This reduction in foreclosures is key because over the past two years foreclosed properties were often the most aggressively priced on the market.
Last month, foreclosure resales – houses and condos sold in October that had been foreclosed on in the prior 12 months – made up 40.6 percent of all Southland resales. That was up insignificantly from 40.4 percent in September and down from a high of 56.7 percent in February this year.
As sales of lower-cost foreclosures began to wane earlier this year, sales in higher-cost neighborhoods picked up. High-end homes began to account for a greater share of all sales and helped reverse the steep slide in the median price. Over the past few months, however, the high-end’s share of total sales has flattened out.
In October, sales of homes priced $500,000 and above fell to 18.5 percent of all sales, up from a low this year in April of 13.4 percent but down from 20.2 percent in September and 19.6 percent a year earlier. In October 2007, $500,000-plus sales were 41.1 percent of all sales.
Availability of financing for pricier homes appeared to improve in recent months, but the “jumbo” loans that many high-end buyers require remain relatively expensive and difficult to obtain.
Mortgages above $417,000 – formerly the definition of a jumbo loan – made up nearly 40 percent of purchases before the August 2007 credit crunch hit. Last month they accounted for 15.1 percent, the same as in September but up from 13.3 percent a year ago and a 2009 low of 9.3 percent in January.
MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,196 last month, up from $1,189 for September, and down from $1,470 in October a year ago. Adjusted for inflation, current payments were 46.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 55.8 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards, although mortgage default notices have flattened out or trended lower in many areas lately. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average in some markets, MDA DataQuick reported.
Source: DQNews.com Media calls: Andrew LePage (916) 456-7157 or John Karevoll (909) 867-9534
