October 13, 2011
La Jolla, CA—Southern California home sales dropped last month from August, as they normally do, and eked out a tiny gain from a year earlier as bargain hunting below $300,000 remained relatively strong. Home prices continued their sideways-to-downward slide, with the region’s median sale price falling below the year-ago level for the seventh consecutive month, a real estate information service reported.
A total of 18,149 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in September. That was down 7.7 percent from 19,654 in August and up 0.3 percent from 18,091 in September 2010, according to San Diego-based DataQuick.
It’s normal for home sales to drop between August and September, partly because many home buyers try to close their deals before school starts in late summer. On average, sales have fallen 8.3 percent between August and September since 1988, when DataQuick’s statistics begin.
September sales have varied from a low of 12,455 in 2007 to a high of 37,771 in 2003. Last month’s sales were 25.3 percent below the September average of 24,310 transactions since 1988.
“Last month’s Southland sales weren’t great but, like some other economic indicators of late, they came in a bit higher than some might have expected. Holding steady with a year ago isn’t so bad when you consider the hits the housing market has taken in recent months, including a big psychological blow from a tanking stock market in early August. Part of what’s keeping demand afloat is improved affordability thanks to ultra-low mortgage rates and lower home prices. We’ll have to wait and see what impact the lower conforming loan limits, which took effect recently, will have in some of the higher-priced markets,” said John Walsh, DataQuick president.
The median price paid for all new and resale Southland houses and condos purchased last month was $280,000. That was up 0.4 percent from $279,000 in August but down 5.2 percent from $295,500 in September 2010.
The regional median has declined year-over-year for the past seven months – since March. The last time any one of the six Southland counties posted an annual gain in its median sale price was in January, when San Bernardino logged a 1.0 percent year-over-year increase.
Last month’s median was 13.4 percent higher than the median’s low point in the current real estate cycle – $247,000 in April 2009 – but was 44.6 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.
Today’s median price is also undermined by the Southland’s extraordinarily weak new-home market. Sales of newly built homes, which typically sell for more than resale homes, totaled 1,056 last month, down 24.9 percent from a year ago and the lowest for the month of September in DataQuick’s records back to 1988.
The focus for many buyers continues to be on the region’s most affordable resale homes, often located in areas hit hardest by distressed property sales and price declines. Compared with a year earlier, September home sales fell in the middle and upper price ranges but rose 5.6 percent in the below-$300,000 market. Sales of homes priced $300,000 to $800,000 fell 9.3 percent year-over-year, while sales over $800,000 fell 10.4 percent from September 2010.
Many of the sub-$300,000 deals were distressed properties, which accounted for more than half of the Southland resale market last month. Nearly 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 32.3 percent of the Southland resale market in September, down from 32.4 percent in August and 33.6 percent a year earlier. Last month’s figure was the lowest since January 2008, when foreclosure resales were 28.6 percent. They 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 18.5 percent of Southland resales last month. That was up from 17.5 percent in August and 16.1 percent a year ago. Two years ago the estimate was 15.3 percent.
Tight credit conditions didn’t let up last month, meaning demand continues to be constrained 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 7.4 percent of all Southland home purchase loans, down from 8.7 percent in August but up from 5.5 percent a year ago. The average monthly ARM rate over the past decade is about 37 percent.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.8 percent of last month’s purchase lending, up from 17.2 percent in August but down from 18.1 percent a year earlier. In the current cycle, jumbos fell in early 2009 to less than 10 percent of the Southland purchase market. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for 40 percent of the purchase loan market.
In lower-cost Southland markets, much of the activity continues to be fueled by government-insured FHA loans, a popular low-down-payment choice among first-time homebuyers. FHA loans accounted for 32.5 percent of purchase mortgages in September, up slightly from 31.8 percent in August but down from 34.8 percent a year earlier.
Meanwhile, many buyers continue to skip a home loan and use cash.
Southland buyers paying cash accounted for 28.5 percent of total September home sales, paying a median $210,000. Last month’s cash buyer level was down slightly from 29.1 percent in August but up from 26.2 percent a year earlier. Cash purchases hit a high of 32.3 percent of sales this February, while the 10-year monthly average is about 14 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.
Last month 52.9 percent of those paying cash were absentee buyers, meaning they were investors or second-home buyers.
All absentee buyers – those using cash or a mortgage – purchased 24.3 percent of the Southland homes sold in September, paying a median $202,000. Absentee buyers made up 24.8 percent of sales in August and 21.4 percent in September 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 59 percent of absentee buyers paid cash in September.
Last month 19.8 percent of all sales were for $500,000 or more, down from 20.1 percent in August and down from 21.6 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 price threshold. Over the past 10 years, a monthly average of 27.5 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 share of total sales compared with recent history. Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 37.1 percent of total sales last month, compared with a 10-year monthly average of 36.8 percent. Last month’s figure was down slightly from 37.2 percent in August but up from 36.0 percent a year ago. These higher-cost zips codes’ contribution to overall sales hit a low of 26.8 percent in January 2009.
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 $1,084 last month, down from $1,101 in August and down from $1,177 in September 2010. Adjusted for inflation, current payments are 53.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.9 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 few years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.