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Southland Home Sales, Median Price Post Steeper Declines From 2010

DQNews.com - June 13, 2011

La Jolla, CA---Southern California home sales held at a three-year low last month amid a sluggish move-up market and record-low sales of newly built homes. The median sale price fell year-over-year by the largest amount in 20 months as buyer uncertainty, tight credit and lackluster hiring continued to restrain housing demand, a real estate information service reported.

A total of 18,394 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in May. That was up insignificantly – 0.3 percent – from 18,344 in April, and down 17.4 percent from 22,270 in May 2010, according to San Diego-based DataQuick. May marked the 11th consecutive month in which sales fell year-over-year.

On average, sales between April and May have increased 5.7 percent since 1988, when DataQuick's statistics begin. May sales have varied from a low of 16,917 in 2008 to a high of 35,557 in 2005. Last month’s sales count was 29.0 percent below the May average of 25,902. May sales were lower than last month in just three of the past 23 years: 2008, 1995 and 1993.

The 1,152 newly built homes that sold across the Southland last month marked the lowest new-home total for the month of May since at least 1988.

“A year ago we were talking about sales reaching a four-year high as buyers rushed to take advantage of expiring federal homebuyer tax credits. Now sales are stuck at a three-year low. The government stimulus is long gone and some of the fundamental drivers of housing demand have yet to strengthen enough to lift sales to even average levels. Some of the key culprits are weak job growth, tight credit and a hesitancy among potential buyers and sellers, who question whether this is the best time to make their move,” said John Walsh, DataQuick president.

“So here we sit in the market doldrums,” he continued. “Two of the more likely sources of fresh wind in the market’s sails would be a pickup in hiring or further home price reductions.”

The median price paid for all new and resale Southland houses and condos purchased last month was $280,000, the same as in April but down 8.2 percent from $305,000 in May 2010. That year-over-year drop was the largest since the median fell 10.9 percent in September 2009.

The median has declined year-over-year for the past three months. It has been unchanged or lower than a year earlier each month since last December, when it posted a 0.3 percent annual increase.

Last month’s median was 13.4 percent higher than the median’s low point for the current real estate cycle – $247,000 in April 2009. The cycle’s peak median was $505,000 in mid 2007. The peak-to-trough drop was due to a decline in home values and a shift in sales toward low-cost homes, especially inland foreclosures.

Distressed property sales continued to account for more than half of the Southland resale market last month, with little change from April. Roughly one out of three homes resold was a foreclosure, while about one in five was a “short sale,” where the sale price fell short of what was owed on the property.

Foreclosure resales – properties foreclosed on in the prior 12 months – made up 33.4 percent of the Southland resale market in May, down slightly from 33.8 percent in April and 33.9 percent a year earlier. Foreclosure resales peaked at 56.7 percent in February 2009.

Short sales made up an estimated 18.0 percent of Southland resales last month. That was up from an estimated 17.1 percent in April, down from 20.1 percent a year earlier, and up from 12.9 percent two years ago.

Tight credit conditions continue to hamper sales in mid- to high-end markets that had long relied on adjustable-rate and “jumbo” home loans.

Last month adjustable-rate mortgages (ARMs) accounted for 8.8 percent of all Southland purchase loans, up from 8.5 percent in April and 6.6 percent a year ago. While still relatively low, last month’s ARM share was the highest since 10.3 percent of purchase loans were ARMs in August 2008. Until a few years ago, ARMs were nothing unusual: Over the past 10 years, a monthly average of about 38 percent of purchase loans were ARMs.

Last month buyers using ARMs paid a median $502,000 for their homes, and their median purchase mortgage was $376,500.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.1 percent of last month’s purchase lending, down a hair from 17.4 percent in April and 17.2 percent a year earlier. In the current cycle, jumbos fell in early 2009 to less than 10 percent of the purchase market. In the months leading up to the credit crisis that struck in August 2007, jumbos accounted for 40 percent of the market. Last month buyers using jumbos paid a median $705,000 for their homes, with a median loan amount of $575,043.

In lower-cost neighborhoods, many buyers – especially investors – continued to purchase homes without a loan.

Southland buyers paying cash accounted for 29.1 percent of May home sales, paying a median $215,000. Last month’s cash buyer level was down from 31.8 percent in April but up from 25.2 percent a year earlier. Cash purchases hit a high of 32.3 percent of sales this February, while the 10-year monthly average is 13.6 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.

Many who pay cash are absentee buyers, who are mainly investors. Absentee buyers purchased 24.6 percent of the Southland homes sold in May, paying a median $210,000. Absentee buyers made up 25.4 percent of sales in April and 19.7 percent in May 2010. The absentee share of the market peaked this February at 26.4 percent. Over the last 10 years, absentee buyers purchased a monthly average of 16.4 percent of all homes sold.

In the overall market, sales fell across all price categories last month compared with a year earlier. But in percentage terms sales in the lower and higher price ranges held up best: Transactions below $200,000 made up 30.6 percent of last month’s deals, up from 26.8 percent a year earlier. Sales of homes priced at $800,000 or more made up 7.5 percent of last month’s total sales, the same as a year ago.

However, sales between $300,000 and $800,000 – a range in which many move-up transactions occur – accounted for 38.9 percent of all deals, down from 44.4 percent a year earlier.

Last month 20.3 percent of total sales were for $500,000 or more, down a tad from a revised 21.2 percent in April and down from 22.3 percent a year earlier. The low point for $500,000-plus sales was in January 2009, when only 13.8 percent of sales were above that threshold. Over the past 10 years, a monthly average of 27.2 percent of homes sold for $500,000 or more.

However, an alternative method of tracking mid- to high-end activity suggests those neighborhoods now account for a fairly normal level of sales relative to overall regional activity. Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 37.4 percent of total sales last month, compared with a 10-year monthly average of 37.0 percent. Last month’s figure was up slightly from 37.3 percent in April and 37.0 percent a year ago. These higher-cost zips codes’ contribution to overall sales hit a low of 26.2 percent in January 2009.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 33.6 percent of all mortgages used to purchase homes in May. That was up from 33.2 percent in April but down from 36.2 percent a year earlier. Two years ago FHA loans made up 35.7 percent of the purchase loan market, while three years ago it was 20.0 percent.

The percentage of Southland homes that were “flipped” – bought and re-sold on the open market within a six-month period – dipped slightly last month to 3.1 percent of all sales. That was down from 3.3 percent in April and 3.4 percent a year ago. Flipping varied last month from as little as 1.6 percent of sales in Ventura County to as much as 3.5 percent in San Diego and Los Angeles counties.

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 $1,154 last month, down 2.3 from $1,181 in April and down 10.8 percent from $1,293 in May 2010. Adjusted for inflation, current payments are 50.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 59.0 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 but is lower than peak levels reached over the last two years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Sales Volume Median Price
All homes May-10 May-11 %Chng May-10 May-11 %Chng
Los Angeles    7,320 5,983 -18.30% $345,000 $320,000 -7.20%
Orange         3,257 2,664 -18.20% $450,000 $425,000 -5.60%
Riverside      4,164 3,644 -12.50% $210,000 $197,000 -6.20%
San Bernardino 2,835 2,323 -18.10% $160,000 $150,000 -6.30%
San Diego      3,879 3,087 -20.40% $340,000 $324,500 -4.60%
Ventura        815 693 -15.00% $380,000 $360,500 -5.10%
SoCal          22,270 18,394 -17.40% $305,000 $280,000 -8.20%

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