July 17, 2013 dqnews.com
Southern California home sales fell in June amid a still-tight supply of homes for sale, rising mortgage rates and a letup in investor buying. The median sale price rose at a record year-over-year pace to the highest level – $385,000 – in more than five years, a real estate information service reported.
A total of 21,608 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 6.2 percent from 23,034 sales in May, and down 2.1 percent from 22,075 sales in June 2012, according to San Diego-based DataQuick.
Last month’s year-over-year sales decline was the first for any month since last September. June sales were 20.9 percent below the June average of 27,315 sales since 1988, when DataQuick’s statistics begin. Over the past seven years Southland sales have been below average for any particular month.
The median price paid for all new and resale houses and condos sold in the six-county region was $385,000 last month, up 4.6 percent from $368,000 in May and up 28.3 percent from $300,000 in June 2012. Last month’s median was the highest for any month since April 2008, when it was also $385,000, and the year-over-year increase was the highest for any month in DataQuick’s records back to January 1989.
The median price has risen on a year-over-year basis for 15 consecutive months, with those annual gains ranging between 10.8 percent and 28.3 percent over the past 11 months. June’s median remained 23.8 percent below the peak $505,000 median in spring/summer 2007. The median fell by $256,000 from that peak to its $249,000 trough in April 2009, and it has now regained just over half – 51.8 percent – of that peak-to-trough loss.
In a sign of continued market confidence, Southern California home buyers continue to put near-record amounts of their own money into residential real estate. In June they paid a total of $4.7 billion out of their own pockets in the form of down payments or cash purchases. That was down from May’s all-time high of $5.5 billion, and up from $4.1 billion a year ago.
“This market’s getting really interesting. Rates have shot up enough to put a dent in housing affordability. Investor and cash buyers are starting to back off a bit, while there’s evidence the supply of homes on the market, while still thin by historical standards, has risen meaningfully. We saw an amazing pop in home prices over the last year. Now we see signs suggesting that blistering pace won’t persist. We continue to believe that a ‘supply response’ to the run-up in prices will gradually tame price appreciation. If mortgage interest rates shoot up again then that’s virtually a given,” said John Walsh, DataQuick president.
It appears that around three-quarters of last month’s record 28.3 percent year-over-year gain in the Southland median sale price reflects rising home prices, while roughly a quarter reflects a change in market mix.
In June, the lowest-cost third of the region’s housing stock saw a 23.5 percent year-over-year rise in the median price paid per square foot for resale houses. The annual gain was 20.5 percent for the middle third of the market and 17.5 percent for the top, most-expensive third.
The number of sales in the middle and upper price ranges continued to rocket above year-ago levels, while activity dropped sharply in many supply-starved affordable markets.
Home sales rose 22.7 percent year-over-year in the $300,000 to $800,000 price segment – a range that would include many move-up buyers. The number sold for $500,000 or more jumped 35.9 percent from one year earlier, while $800,000-plus sales rose 33.6 percent year-over-year.
In June, 33.0 percent of all Southland home sales were for $500,000 or more, up from 31.9 percent of sales in May and up from 23.1 percent a year earlier. Last month over-$500,000 sales were the highest since February 2008, when 34.2 percent of all sales crossed that price threshold.
Last month the number of Southland homes sold below $200,000 dropped 43.2 percent year-over-year, while sales below $300,000 fell 35.0 percent.
Weak demand isn’t the culprit. The main problems are a fussy mortgage market and an inadequate supply of homes for sale. Many owners can’t afford to sell their homes because they still owe more than they are worth, and lenders aren’t foreclosing on as many properties, further limiting supply.
In June foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 9.1 percent of the Southland resale market. That was down from a revised 10.9 percent the month before and down from 24.4 percent a year earlier. Last month’s foreclosure resale rate was the lowest since it was 7.9 percent in July 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 16.2 percent of Southland resales last month, the lowest level in nearly four years. Last month’s figure was down from an estimated 17.3 percent the month before and down from 24.4 percent a year earlier.
Absentee buyers – mostly investors and some second-home purchasers – bought 28.7 percent of the Southland homes sold last month. That was down from 29.5 percent in May and up from 27.3 percent a year earlier. The record was 32.4 percent in January this year, while the monthly average since 2000, when the absentee data begin, is 18.2 percent. Last month’s absentee buyers paid a median $300,000, up 31.0 percent from a year earlier.
After hitting a peak earlier this year, the share of homes flipped has edged slightly lower but remains higher than last year. In June, 5.6 percent of all Southland homes sold on the open market had previously sold in the prior six months, down from a flipping rate of 5.8 percent in May and up from 4.4 percent a year ago. (The figures exclude homes resold after being purchased at public foreclosure auction sales on the courthouse steps).
Buyers paying with cash accounted for 30.2 percent of last month’s home sales, down from 32.7 percent the month before and down from 32.3 percent a year earlier. The peak was 36.9 percent this February, and since 1988 the monthly average is 16.1 percent. Cash buyers paid a median $320,000 last month, up 34.5 percent from a year ago.
Credit conditions continued to show modest signs of improvement.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 28.5 percent of last month’s Southland purchase lending – the highest since August 2007, when jumbos made up 36.7 percent of the market. Last month’s figure was up from 27.8 percent the prior month and up from 20.0 percent a year earlier. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for around 40 percent of the home loan market.
Last month 9.2 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs), up from 8.0 percent the prior month and 6.7 percent a year earlier. June’s figure was the highest since ARMs were 10.5 percent of the purchase loan market in August 2008. Since 2000, a monthly average of about 32 percent of Southland purchase loans have been ARMs.
The most active lenders to Southern California home buyers last month were Wells Fargo with 8.7 percent of the purchase loan market, imortgage.com with 2.6 percent, and Bank of America with 2.6 percent.
All lenders combined provided $6.2 billion in mortgage money to Southern California home buyers in June, down from $6.4 billion in May and up from $5.2 billion in June last year.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 19.4 percent of all purchase mortgages last month. That was down from 20.6 percent the month before and 28.4 percent a year earlier. In recent months the FHA share has been the lowest since spring 2008. The decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers are having competing with investors and cash buyers.
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 Southland buyers committed themselves to paying last month was $1,483, up from $1,329 the month before and up from $1,102 a year earlier. Adjusted for inflation, last month’s typical payment was 38.1 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 49.3 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
To view the county-by-county chart, visit DQNews.com.