Southern California housing market holds its ground

Wholesale prices dip, new home construction rises

By Alejandro Lazo, Los Angeles Times

May 19, 2010

Southern California’s housing market held its ground in April, data released Tuesday show, with prices rebounding off their year-earlier lows but sales slipping for the first time in nearly two years as the number of fast-selling foreclosure properties dwindled considerably.

The median price for all Southland houses, town homes and condominiums sold last month was $285,000, a 15.4% increase from the April 2009 bottom, when foreclosures accounted for more than half the resale market. But the closely watched median — the price at which half the homes sold for more money and half for less — was unchanged from March, according to San Diego-based MDA DataQuick.

Sales for the region fell 1% in April compared with a year earlier — the first decline in 22 months — indicating that the Southland’s supply of cheaper, bank-owned properties is tightening when compared with last year’s glut. The month-to-month drop was almost the same, 0.9% compared with March.

“The market’s still taking baby steps on a long road to recovery, trying to find its footing,” MDA DataQuick President John Walsh said. “It’s unclear which of today’s sales characteristics are part of a new reality and which are still temporary turbulence.”

Some of the sales slowdown may be attributable to buyers delaying their closings until May 1 or after to take advantage of a state tax credit of up to $10,000 for first-time buyers and those purchasing new homes.

Also, any last-minute rush of buyers motivated by the expiring federal tax credit last month isn’t likely to be fully captured in April’s data. Many of those deals are likely to close this month or next, particularly if buyers timed their purchases to claim both the federal and state incentives.

Many experts worry that the housing market could take another fall in coming months because a slew of government programs intended to support it have expired, the jobs picture remains cloudy and the private mortgage market is still in disarray. A much-feared flood of foreclosure properties, if it materializes, could also send values falling again.

But the expiration of the federal tax credits — which offered up to $8,000 for first-time purchases and $6,500 for repeat buyers — has presented the most immediate concern. Nationally, sales plummeted for three months beginning last December after a surge of buyers rushed to close deals before an initial November deadline for the credit. Congress expanded and extended the credit before the deadline, but sales nationally didn’t pick up again until March.

“Everybody out there on the planet expects a [second] drop off the cliff,” said Cameron Findlay, chief economist at LendingTree.com.

The Southland saw a surge of people signing contracts for homes in April, according to data from the California Assn. of Realtors. Sales contracts for single-family homes in Los Angeles were up 27% in April from the same month last year. Contracts signed in April were up 9% in Anaheim, 33% in Santa Ana, 25% in San Diego and 14% in Santa Monica. To qualify for the federal credit, eligible buyers must close their deals by June 30.

Working in favor of a continued recovery are more-affordable prices and low interest rates.

Sales are also steadily shifting away from the far-flung developments of the Inland Empire, which were ravaged by a high number of foreclosures after the housing market tanked, and are picking up in areas closer to major centers of employment.

Riverside and San Bernardino, the two most affordable counties in the region, for instance, accounted for 33.8% of all sales in April compared with 37% in the same month one year earlier, DataQuick said.

Also, 19.3% of all sales were for $500,000 or more, compared with 14.8% a year earlier, and ZIP Codes in the top one-third of the region’s housing market according to a historical analysis of prices by DataQuick accounted for 28.6% of existing single-family house sales last month, compared with 23.2% a year earlier.

“The DataQuick numbers are consistent with near-record-low mortgage interest rates, near-record-low house prices and ample evidence of an economy that is on the rebound,” said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. “We are seeing increasing signals of normalization of the housing market as sales spread to more prosperous regions.”

Foreclosures have also dropped off considerably as a part of the resale market, accounting for 36.4% of sales in April compared with 53.5% a year earlier and an all-time high of 56.7% in February 2009.

A total of 20,299 properties sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That represented a decline of 0.9% from the 20,476 sold in March and a 1% decrease from the 20,514 that sold in April 2009.

“We have a very good housing environment, and that is the good news, that there has been some recovery,” said Gerd-Ulf Krueger, principal economist of Housingecon.com. “The question is: Is that sustainable moving forward?”

Separately, a mixed report released by the federal government Tuesday cast doubt on the prospects for new construction as U.S. housing starts gained in April but the number of permits for new buildings fell.

Starts in April hit a seasonally adjusted annual pace of 672,000, 5.8% above the revised March estimate of 635,000 and 40.9% above the revised April 2009 rate of 477,000, the Commerce Department said. Meanwhile, building permits in April were at a seasonally adjusted annual rate of 606,000, an 11.5% decline from the revised March rate of 685,000, but 15.9% above the revised April 2009 estimate of 523,000.

“On balance, this was a disappointing report because of the drop in single-family permits, the report’s key item,” said Patrick Newport, U.S. economist for consultancy IHS Global Insight. “The drop is probably payback from the tax credit that expired April 30. Permits taken out in March and earlier stand a good chance of being completed by June 30, the date that the closing papers must be signed. Permits taken out in April stand less of a chance.”

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