Southland August Home Sales Climb, Median Price Falls Again

September 14, 2011

La Jolla, CA---Southern California home sales rose last month above the July and year-earlier level, the result of seasonal forces, a relatively high number of business days this August and continued robust bottom-feeding. Prices appeared to be trending sideways to downward, with the region’s overall median sale price dipping below a year earlier for the sixth consecutive month, a real estate information service reported.

A total of 19,654 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in August. That was up 8.6 percent from 18,090 in July and up 6.0 percent from 18,541 in August 2010, according to San Diego-based DataQuick.

On average, sales between July and August have risen 3.4 percent since 1988, when DataQuick's statistics begin. August sales have varied from a low of 16,379 in 1992 to a high of 39,562 in 2003. Last month’s sales count was 26.6 percent below the August average of 26,761 sales since 1988.

August was the first month since June 2010 to post a year-over-year gain in home sales. Last month was also the first since November 2009 in which all six Southland counties logged higher sales than a year earlier. One reason it’s getting easier to beat the year-ago sales numbers: Home sales fell off sharply last summer after federal and state homebuyer tax credits expired.

August is typically one of the stronger sales months of the year, largely because many families want to move before school starts in late summer. Among all months, June has had the highest number of sales most often – in eight of the past 23 years in DataQuick’s records – while August has had the highest number of sales four times over that period.

Last month’s sales picture changes when viewed in terms of the average number of homes sold daily. Last month had 23 business days (the most for any August since 2007) on which home sales could be recorded, compared with 20 business days in July and 22 in August 2010. The average number of homes sold daily last month fell about 6 percent from July and rose less than 1 percent compared with a year earlier.

“Scratch beneath the surface and there’s not a lot to cheer about this month. Home sales were up from a year earlier but remained far below average. Many would-be buyers can’t find financing, and others who want to make a move now are stuck because they owe more than their homes are worth. Financial markets are increasingly choppy, the political outlook is incredibly murky and consumer confidence remains poor. Needless to say, it’s not an environment ripe for stabilizing the housing market,” said John Walsh, DataQuick president.

The median price paid for all new and resale Southland houses and condos purchased last month was $279,000. That was down 1.4 percent from $283,000 in July and down 3.1 percent from $288,000 in August 2010. Last month’s median was the lowest since February, when it was $275,000.

The median has declined year-over-year for the past six months and has declined month-to-month for the last two. 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 13.0 percent higher than the median’s low point in the current real estate cycle – $247,000 in April 2009 – but was 44.8 percent lower than the peak $505,000 median in mid 2007. The peak-to-trough drop was due to a decline in home values and a shift in sales toward lower-cost homes, especially inland foreclosures.

The region’s overall median sale price is suppressed somewhat by abnormally low sales of newly built homes, which typically sell for more than resale homes. Southland builders sold 1,184 new houses and condos last month, down 14.3 percent from a year earlier and the lowest new-home tally for an August in DataQuick’s records back to 1988.

Compared with a year earlier, total August home sales fell in the upper price ranges but rose 10.2 percent in the below-$300,000 segment.

Many of those sub-$300,000 deals were distressed properties, which accounted for more than half of the Southland resale market last month. Just over one out of three homes resold last month was a foreclosure, while close to one in five was a “short sale.”

Foreclosure resales – properties foreclosed on in the prior 12 months – made up 34.6 percent of the Southland resale market in August, up from 34.5 percent in July but down from 37.6 percent a year earlier. Foreclosure resales peaked at 56.7 percent in February 2009.

Short sales, where the sale price fell short of what was owed on the property, made up an estimated 17.9 percent of Southland resales last month. That was up from 17.3 percent in July but down from 18.9 percent a year ago. Two years ago the estimate was 14.5 percent.

Tight credit continues 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 8.6 percent of all Southland purchase loans, down from 8.9 percent in July but up from 5.5 percent a year ago. While still low by historical standards, the ARM rate in recent months has been the highest in nearly three years. Still, it remains far below the norm over the last decade, when ARMs averaged 37.4 percent of all purchase loans.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.3 percent of last month’s purchase lending, down from 17.8 percent in July and 18.1 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 crunch that struck in August 2007, jumbos accounted for 40 percent of the Southland market.

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

Southland buyers paying cash accounted for 28.5 percent of total August home sales, paying a median $210,000. Last month’s cash buyer level was down slightly from 28.7 percent in July but up from 14.1 percent a year earlier. Cash purchases hit a high of 32.3 percent of sales this February, while the 10-year monthly average is 14.1 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.

Last month 53.5 percent of those paying cash were absentee buyers, meaning they were investors or second-home buyers.

Absentee buyers purchased 24.6 percent of the Southland homes sold in August, paying a median $197,000. Absentee buyers made up 23.9 percent of sales in July and 22.3 percent in August 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 16.7 percent of all homes sold.

Nearly 60 percent of absentee buyers paid cash in August.

Last month 19.6 percent of all sales were for $500,000 or more, down from 20.7 percent in July and down from 21.2 percent a year earlier. The low point for $500,000-plus sales in this cycle was in January 2009, when only 13.8 percent of sales were above that threshold. Over the past 10 years, a monthly average of 27.6 percent of homes sold for $500,000-plus.

An alternative method of tracking sales by price segment suggests mid- to high-end activity now accounts for a fairly normal level of sales compared with recent history. Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 36.7 percent of total sales last month, compared with a 10-year monthly average of about 37 percent. Last month’s figure was down slightly from 37.4 percent in July but up from 35.6 percent a year ago. These higher-cost zips codes’ contribution to overall sales hit a low of 26.8 percent in January 2009.

Government-insured FHA loans, a popular low-down-payment choice among first-time homebuyers, accounted for 31.9 percent of purchase mortgages in August. That was up slightly from 31.5 percent in July but down from 35.3 percent a year earlier. Two years ago FHA loans made up 35.6 percent of all purchase loans, while three years ago it was 26.8 percent.

The percentage of Southland homes that were “flipped” – bought and re-sold on the open market within a six-month period – held at 3.5 percent of all sales in August. That was the same as in July as well as a year earlier. Flipping varied last month from as little as 2.7 percent of sales in Ventura County to as much as 4.0 percent in San Bernardino County.

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 $1,101 last month, down 4.6 percent from $1,154 in July and down 4.9 percent from $1,158 in August 2010. Adjusted for inflation, current payments are 52.5 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.1 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 much lower than peak levels reached over the last few years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Sales Volume Median Price
All homes Aug-10 Aug-11 %Chng Aug-10 Aug-11 %Chng
Los Angeles    6,180 6,595 6.70% $330,000 $315,000 -4.50%
Orange         2,538 2,780 9.50% $440,000 $420,000 -4.50%
Riverside      3,478 3,643 4.70% $200,000 $190,000 -5.00%
San Bernardino 2,513 2,622 4.30% $158,000 $150,000 -5.10%
San Diego      3,113 3,249 4.40% $337,000 $320,000 -5.00%
Ventura        719 765 6.40% $370,000 $355,000 -4.10%
SoCal          18,541 19,654 6.00% $288,000 $279,000 -3.10%


Source: Media calls: Andrew LePage (916) 456-7157

Copyright 2011 DataQuick. All rights reserved.

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