DQNews.com October 19, 2010
La Jolla, CA—Southland home sales dropped for the third month in a row amid renewed doubts about a market that is recovering in fits and starts. The median price moved up on a year-over-year basis for the tenth month in a row and has regained about one-fifth of its peak-to-trough loss. The effects on the market of the latest chapter in the foreclosure crisis are unclear, a real estate information service reported.
A total of 18,091 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in September. That was down 2.4 percent from 18,541 in August, and down 16.0 percent from 21,539 for September 2009, according to MDA DataQuick of San Diego.
This was the slowest September since 2007, when 12,455 homes were sold. Last month’s sales were 26.3 percent lower than the September average of 24,578. DataQuick’s statistics begin in 1988. An August-to-September drop is normal for the season: On average, sales have dipped 9.2 percent between those two months.
“Today’s market can be characterized as much by activity that’s not happening, as by the activity that is happening. We’re seeing distress-selling, bargain-hunting and entry-level buying, while the rest of the market is still largely on hold,” said John Walsh, MDA DataQuick president.
“As many wait for this market uncertainty and turbulence to pass, demand is being generated and is accumulating. At some point, the mortgage spigot will be re-opened and there will be a surge of buying activity, probably financed with low interest rates,” he said.
The median price paid for a Southland home was $295,500 last month. That was up 2.6 percent from $288,000 in August, and up 7.5 percent from $275,000 for September 2009. The low point of the current cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The median’s peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially foreclosures.
Foreclosure resales accounted for 33.4 percent of the resale market last month, down from 34.5 percent in August and down from 40.4 percent a year ago. The all-time high was February 2009 at 56.7 percent, DataQuick reported.
Government-insured FHA loans, a popular choice among first-time buyers, accounted for 36.4 percent of all mortgages used to purchase homes in September, down from 37.3 percent in August and 38.9 percent a year ago.
Last month 21.2 percent of all sales were for $500,000 or more, the same as August and up from 20.0 percent a year ago. The low point for $500,000-plus sales was in February last year, when 13.6 percent of sales crossed that threshold. Over the past decade, a monthly average of 25.4 percent of homes sold for $500,000 or more.
Viewed a different way, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 31.0 percent of existing single-family house sales last month, up from 30.0 percent in August and 28.4 percent a year ago. Over the last decade those higher-end areas have contributed a monthly average of 33.3 percent of regional sales. Their contribution to overall sales hit a low of 21.0 percent in January 2009.
High-end sales would be stronger if adjustable-rate mortgages (ARMs) and “jumbo” loans were easier to obtain. Both have become much more difficult to get since the credit crunch hit three years ago.
While about 44 percent of all Southland purchase mortgages since 2000 have been ARMs, the figure was 5.5 percent last month, up from 5.4 percent in August and up from 4.0 percent in September last year.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 18.1 percent of last month’s purchase lending, the same as the month before and up from 15.2 percent in September 2009. Before the August 2007 credit crisis, jumbos accounted for 40 percent of the market.
Absentee buyers – mostly investors and some second-home purchasers – bought 21.0 percent of the homes sold in September, paying a median of $205,000. Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 25.3 percent of September sales, paying a median $200,000. In February this year, cash sales peaked at 30.1 percent. The 22-year monthly average for Southland homes purchased with cash is 14.2 percent.
The “flipping” of homes has trended higher over the past year. Last month the percentage of Southland homes bought and re-sold within a six-month period was 3.7 percent, up from 3.5 percent in August and 2.6 percent a year earlier. Last month’s flipping rate varied from as little as 2.9 percent in Riverside County to as much as 4.2 percent in Orange County.
MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, 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 $1,177 last month, up from $1,158 for August, and down from $1,189 September a year ago. Adjusted for inflation, current payments are 47.5 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 57.0 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, MDA DataQuick reported.
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