May closings in the Southland were up 21%, with signs of revival seen in the key move-up market.
Southern California home sales accelerated sharply in May and prices improved for the second consecutive month, mirroring a national trend and providing fresh evidence that housing is recovering from its five-year slump.
The number of homes sold soared 21% compared with a year ago, while the median price jumped 5.4%. Activity was particularly robust for homes priced above $300,000, a sign that the long-dormant move-up market could be coming out of its slumber, according to real estate research firm DataQuick.
Several factors are driving the rebound, including bargain-basement mortgage rates, a slowly improving economy and a growing consensus that housing prices are at or near bottom.
“Housing has lagged the recovery overall, but we are finally seeing broad-based evidence of a recovery that is kicking into gear,” said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. “My sense is that there is a broad perception among the potential home buyers that we are close to the low point in the interest-rate cycle and the home-price cycle, and housing affordability is about as good as it is going to get.”
Declining foreclosures are another factor. The glut of repossessed houses being sold at fire-sale prices served as a drag on home values overall, but banks are taking back fewer homes compared with a year ago. A report by RealtyTrac being released Thursday shows that statewide foreclosure filings last month were down 19% from a year ago, and national foreclosure filings dropped 4%.
Foreclosures made up 26.7% of the region’s resale market last month, the lowest level since December 2007. In all, more than 22,000 properties sold in the region, helped by an extra business day in May.
While the housing market is improving, it’s still far from the boom times. Last month’s home sales pace was 15% below the average sales tally for May since 1988, according to San Diego-based DataQuick. And despite the improvement in prices, values remain depressed from their peak, with last month’s median 42% off the high in July 2007.
Still, an uptick in home sales will help the economy overall — especially as people find work in the real estate and lending industries.
Jeff Zumbo, founder of Major Appraisals in Culver City, said the Westside of Los Angeles has seen a sharp uptick in business.
“We’re very, very, very busy right now because interest rates are low,” Zumbo said. “We have not hired more appraisers, but we may be hiring a staff person to help run the office.”
Laguna Niguel mortgage broker Jeff Lazerson is also experiencing the crush. He has written 50 loans in June, well above his usual pace. This year he has hired two full-time employees and plans on hiring another. He is looking for new office space.
“I have never had the deluge I am having now in 25 years,” Lazerson said. “I am bulging at the seams.”
Lazerson said he was particularly encouraged by the rise in clients with equity in their houses. Many experts have seen the return of the move-up market as crucial to getting real estate back on firmer footing.
Indeed, DataQuick said one reason prices rose was increased sales activity in higher-priced coastal markets. Last month’s median home price, the point at which half the properties sold for more and half for less, was the highest since September 2010.
As home sales pick up, it could even breathe new life into the moribund home-construction business. Home builders have struggled to compete with foreclosed homes in outlying areas like the Inland Empire and Antelope Valley — where much of the building occurred during the boom years.
JoAnne Williams, chief executive of JWilliams Staffing in Irvine, said home builders this year have added many more temporary workers than last — an early indicator of more permanent job creation.
“Southern California has really picked up: We are experiencing temp-to-hire levels not seen since 2008,” Williams said. “It’s everyone, the public builders, the smaller guys.”
Economists, however, caution that the job gains seen by some employers have not yet translated into a broader trend.
“With Realtors, I don’t see much hiring or people entering the business,” said Esmael Adibi, director of Chapman University’s A. Gary Anderson Center for Economic Research. “But when you look at the escrow companies and the mortgage brokers — loan processing — that has been increasing, mainly because of refinancing.”
DataQuick President John Walsh, however, said the gains in the “move-up” market were significant, because it suggests more buyers will be entering the market.
Before the collapse in prices, many people would trade their starter homes after a few years for bigger ones. Moving up was so common that chains of buyers and sellers would develop, with each deal dependent on another. The breaking of that cycle has significantly held back growth in the housing market, but DataQuick statistics for May show that move-up buyers may be returning.
Sales between $300,000 and $800,000, a range of prices that would include many buyers who are looking to trade up, surged 23.1% year-over-year in May. Sales of homes under $200,000 rose 7% and sales of homes costing more than $800,000 were up 11.8%.
Sandi Pfister, a real estate agent with South Bay Brokers, said the competition for homes in the cities of Redondo Beach, Hermosa Beach and Manhattan Beach has intensified this year.
“Holy crow,” she said, “one property got 30 offers, a property on Monday got 10 or 12 offers.”