Southland Closes 2012 With Higher Sales and Prices

January 15, 2013

La Jolla, CA---Southern California's housing market ended 2012 with the highest December home sales in three years, the result of robust investment activity, a record level of cash buyers and more sales gains in move-up markets. The median sale price jumped nearly 20 percent from a year ago, pushed higher by greater demand and the market's shift away from foreclosure resales and toward more mid- to high-end deals, a real estate information service reported.

A total of 20,274 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 5.1 percent from 19,285 sales in November, and up 5.3 percent from 19,247 sales in December 2011, according to San Diego-based DataQuick.

A rise in sales from November to December is normal for the season. Last month’s sales were the highest for the month of December since 22,328 homes sold in December 2009, though they were 17.2 percent below the December average of 24,488 sales since 1988, when DataQuick’s statistics begin. The low for December sales was 13,240 in 2007, while the high was 36,865 in 2003.

The median price paid for a home in the six-county Southland was $323,000 last month, up 0.6 percent from $321,000 in November and up 19.6 percent from $270,000 in December 2011. For the past four consecutive months the median has been the highest since it was $330,000 in August 2008. The Southland median has risen or held steady month-to-month for 11 consecutive months and has increased year-over-year for nine consecutive months.

“The housing market had more to offer in 2012 than many anticipated. A lot of markets not only found a price bottom as foreclosures waned but they started to see their first meaningful gains in nearly two years. Buyers on the fence were drawn back into the housing game by amazingly low mortgage rates, a brighter jobs outlook and, in some cases, a renewed sense of urgency,” said John Walsh, DataQuick president.

“Last year should also be remembered as the year the move-up market awoke. If these upward trends hold, which requires a sustained economic recovery, we should eventually see more inventory hit the market. More would-be sellers will be satisfied with what their homes can fetch, and fewer people will owe more than their homes are worth, freeing them up to move. The rise in inventory would at least tame price appreciation.”

Sales rose sharply again in many mid- to-higher-cost markets in December. Home sales between $300,000 and $800,000 – a range that would include many move-up buyers – increased 31.4 percent year-over-year. December sales over $500,000 shot up 40.0 percent year-over-year, while sales over $800,000 jumped 36.3 percent compared with December 2011.

Last month 24.7 percent of all Southland home sales were for $500,000 or more, which ties the November level for the highest for any month since July 2008, when 26.1 percent of sales were for $500,000-plus. In December 2011 18.4 percent of sales crossed the $500,000 threshold.

Lower-cost areas again posted the weakest sales compared with last year. The number of homes that sold below $200,000 fell 28.1 percent year-over-year, while sales below $300,000 dipped 18.2 percent. Sales in the more affordable markets have been hampered by the slowdown in foreclosure activity, which results in fewer foreclosed properties listed for sale. Also, lower-cost markets typically have a relatively high percentage of homeowners who owe more than their homes are worth, meaning they can’t afford to sell.

While inventory and sales have declined in many of these lower-cost areas, higher demand has pushed prices up. In December, the median price paid per square foot in the lowest-cost third of Southern California's housing stock rose 21.1 percent year-over-year, while that measure increased 11.4 percent in the middle and 13.0 percent in the top third of the market.

Last month foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 14.8 percent of the Southland resale market. That was down from 15.4 percent the month before and 32.4 percent a year earlier. Last month’s level was the lowest since foreclosure resales were 13.6 percent of the resale market in September 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 25.6 percent of Southland resales last month. That was down slightly from an estimated 26.5 percent the month before and 26.0 percent a year earlier. However, the number (rather than percentage) of short sales last month was up 7.4 percent from December 2011.

Last month investor and cash buying was at or near record levels.

Absentee buyers – mostly investors and some second-home purchasers – bought 29.1 percent of the Southland homes sold in December. That was up from 28.6 percent the prior month and 26.8 percent a year earlier. Last month's figure was the highest since the absentee share of sales was a record 29.9 percent last February. The monthly average since 2000 is 17.7 percent. Last month’s absentee buyers paid a median $252,750, up 24.8 percent from a year earlier.

Buyers paying with cash accounted for a record 33.8 percent of last month's home sales, tying a revised 33.8 percent the month before and up from 29.8 percent a year earlier. The prior peak for cash purchases was 33.7 percent of all sales last February, and since 2000 the monthly average is 17.3 percent. Cash buyers paid a median $265,000 last month, up 26.2 percent from a year ago.

The number of Southland homes cash buyers bought for $500,000 or more has hovered near record levels in recent months, reflecting difficulties many face in qualifying for larger loans as well as some people's desire to park cash in real estate amid today's low-interest-rate savings environment.

In December, cash buyers bought 1,309 homes priced $500,000 or more, up 49.6 percent from a year earlier. Last month's $500,000-plus cash purchases represented more than one quarter of all homes sold at that price level. About 40 percent of the people who paid $500,000-plus in cash for a home were absentee buyers last month, which typically means they are investors or second-home buyers.

Meantime, credit conditions showed modest signs of improvement.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 22.3 percent of last month’s Southland purchase lending, up from 21.2 percent the prior month and up from 15.3 percent a year earlier. Last month's figure was the highest since September 2007, when jumbos made up 26.9 percent of the purchase loan market. In the months leading up to the credit crunch that struck in August 2007, jumbos made up close to 40 percent of the market.

With rates on fixed 30-year loans so low, and aversion to risk in the marketplace high, the use of adjustable-rate mortgages (ARMs) remains very low in an historical context. Last month 5.9 percent of Southland home purchase loans were ARMs, compared with 5.6 percent in November and 6.4 percent a year earlier. Since 2000, a monthly average of about 33 percent of Southland purchase loans were ARMs.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 23.2 percent of all purchase mortgages last month. That was down from 24.6 percent in November and down from 30.5 percent a year earlier. In recent months the FHA share has been the lowest since summer 2008. The decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers are having competing with investors in the housing market.

The most active lenders to Southland home buyers last month were Wells Fargo with 8.9 percent of the market, Prospect Mortgage with 2.6 percent and IMortgage.com with 2.4 percent.

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 Southland buyers committed themselves to paying last month was $1,152, up from a revised $1,132 the month before and up from $1,026 a year earlier. Adjusted for inflation, last month’s typical payment was 51.2 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 60.0 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity, while above long-term averages, continues to drop and is far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Sales Volume Median Price
All homes Dec-11 Dec-12 %Chng Dec-11 Dec-12 %Chng
Los Angeles 6,591 7,198 9.20% $305,000 $352,000 15.40%
Orange 2,572 3,070 19.40% $400,000 $470,000 17.50%
Riverside 3,584 3,248 -9.40% $194,000 $231,000 19.10%
San Bernardino 2,418 2,135 -11.70% $150,000 $180,000 20.00%
San Diego 3,311 3,757 13.50% $315,000 $366,000 16.20%
Ventura 771 866 12.30% $325,000 $370,000 13.80%
SoCal 19,247 20,274 5.30% $270,000 $323,000 19.60%


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

Copyright 2013 DataQuick. All rights reserved.

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