Bay Area home sales up 45% over '07; median price falls to $400K

October 21, 2008

La Jolla, CA.----Bay Area home sales soared last month above the record-low levels of a year ago, marking the largest gain in over six years. The median sale price did the opposite, diving to $400,000 - 40 percent below its summer 2007 peak - as more sales shifted to lower-cost inland markets laden with foreclosures.

A total of 7,271 new and resale houses and condos closed escrow in the nine-county Bay Area in September. That was up 0.5 percent from 7,232 in August, and up 45 percent from 5,014 in September 2007, according to San Diego-based MDA DataQuick, a real estate information service.

Last month's 45 percent year-over-year sales gain was the highest for any month since April 2002, when sales shot up 49 percent.

However, last month's jump is partly the result of the exceptionally weak activity in September 2007, a record low for that month in DataQuick's statistics back to 1988. Year-ago sales plunged after a credit crunch that struck in August 2007 made "jumbo" mortgages - used to buy higher-end homes - more expensive and harder to obtain. Entry-level sales were already hurting from the subprime mortgage industry meltdown earlier in 2007.

Although sales rose in some coastal communities in September, it was the region's less expensive inland markets that pushed sales up so sharply. Contra Costa, Napa, Sonoma and Solano counties combined accounted for nearly 62 percent of Bay Area sales, compared with 52 percent a year ago. Solano County sales doubled from last year, while sales nearly doubled in Contra Costa and Napa counties.

"Inland markets have spoken: Sales take off when prices drop 30 percent or more from the peak. Closer to the coast, prices in some areas continue to hold up much better, but sales aren't shooting up by as much, if at all. One reason is fewer foreclosures on the coast mean fewer motivated sellers willing to drop prices. Meantime, mortgage money remains tight for pricier homes, and inland buyers looking to move up now have less equity to do so," said John Walsh, MDA DataQuick president.

"For the inland markets," he continued, "September's relatively strong sales provide more evidence that a recovery got well under way this summer. Now it's just a question of whether it will stay on track and provide stable prices and fading foreclosures in 2009, or will it get derailed by an economic crisis."

DataQuick's September sales reflect closed escrows, meaning buyers made their purchase decisions in mid-to-late summer, before the worst of the economic news hit in recent weeks. Statistics over the next month will begin to show how housing demand has fared this fall.

Last month the median price paid for all new and resale houses and condos sold in the Bay Area was $400,000, down 10.5 percent from $447,000 in August and down a record 36.0 percent from $625,000 in September 2007, according to MDA DataQuick.

September's median stood at its lowest point since it was $400,000 in March 2003, and was nearly 39.9 percent below the peak median of $665,000 reached in June, July and August of 2007.

The median price has plummeted for several reasons: Region wide price depreciation, which varies by location; the relatively high cost and qualifying difficulties associated with the jumbo loans used to finance pricier homes; and a significant shift toward a higher portion of sales occurring in lower-cost inland markets.

Moreover, nearly 42 percent of all existing homes sold across the Bay Area last month had been foreclosed on at some point in the prior 12 months, up from 36.1 percent in August and 6.9 percent a year ago. Foreclosures tend to sell at a discount and are concentrated in relatively affordable neighborhoods.

At the county level, foreclosure resales ranged from 9.5 percent of resales in San Francisco to 67.9 percent in Solano County. In the Bay Area's other seven counties, September foreclosure resales were as follows: Alameda, 37.9 percent; Contra Costa, 58.7 percent; Marin, 14.9 percent; Napa, 48.9 percent; Santa Clara, 30.5 percent; San Mateo, 23.8 percent; Sonoma, 48.7 percent.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA 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 Bay Area buyers committed themselves to paying was $1,890 last month, down from $2,121 the previous month, and down from $3,171 a year ago. Adjusted for inflation, current payments are 27.3 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 45.3 percent below the current cycle's peak in June 2006.

Indicators of market distress continue to move in different directions. Foreclosure activity is at or near record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat but might be emerging, MDA DataQuick reported.

	Sales Volume			Median Price
All homes	Sep-07	Sep-08	%Chng	Sep-07	Sep-08	%Chng
Alameda	948	1,410	48.70%	$556,000	$389,500	-29.90%
Contra Costa	916	1,780	94.30%	$551,250	$300,000	-45.60%
Marin	197	231	17.30%	$810,000	$680,000	-16.00%
Napa	68	132	94.10%	$544,250	$439,000	-19.30%
Santa Clara	1,235	1,607	30.10%	$696,500	$505,500	-27.40%
San Francisco	469	458	-2.30%	$773,500	$675,000	-12.70%
San Mateo	486	462	-4.90%	$760,000	$603,000	-20.70%
Solano	321	646	101.20%	$410,000	$263,500	-35.70%
Sonoma	374	545	45.70%	$500,000	$347,500	-30.50%
Bay Area	5,014	7,271	45.00%	$625,000	$400,000	-36.00%