November 12, 2013
Southern California home buying picked up last month compared with September but fell short of a year earlier as sales in inventory-starved, lower-cost markets continued to lag far behind 2012 levels. For the fourth month in a row the region’s median sale price more or less moved sideways, though it was still nearly 22 percent higher than October last year, a real estate information service reported.
A total of 20,150 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 5.4 percent from 19,112 sales in September, and down 4.4 percent from 21,075 sales in October 2012, according to San Diego-based DataQuick.
On average, Southland sales have declined 1.1 percent between September and October since 1988, when DataQuick’s statistics begin.
Last month’s sales were 14.4 percent below the average number of sales – 23,572 – in the month of October. Southland sales haven’t been above average for any particular month in more than seven years. October sales have ranged from a low of 12,913 in October 2007 to high of 37,642 in October 2003.
The median price paid for all new and resale houses and condos sold in the six-county region last month was $383,750, up 0.5 percent from $382,000 in September and up 21.8 percent from $315,000 in October 2012. The $385,000 median this June, July and August was the highest in more than five years.
The median price has risen on a year-over-year basis for 19 consecutive months. Those gains have been double-digit – between 10.8 percent and 28.3 percent – over the past 15 months, and they have been greater than 20 percent for the last 10 months.
October’s median price remained 24.0 percent below the peak $505,000 median in spring/summer 2007.
“Our read on the market is that after playing some rapid catch-up, home prices hit a bit of a mid-summer wall. It took a very specific set of circumstances to trigger price gains of 20 percent or more over the course of a year. We had a pitifully low number of homes for sale, incredibly low mortgage rates and unusually high levels of investor purchases. In recent months each of those drivers has reversed somewhat,” said John Walsh, DataQuick president.
Walsh said it’s still unclear how much the housing market was affected by last month’s partial shutdown of the federal government and fears of a default on the national debt.
“Given the uptick in home buying between September and October, it would be difficult to argue that the latest sales figures reflect a pullback by home shoppers,” Walsh said. “However, we’re reporting deals that closed in October; so it’s possible it will take another month to pick up on any sort of pronounced sales drop-off triggered by last month’s debacle in Washington D.C. Also, mortgage rates drifted lower and the most recent job reports have been decent. Those positives would help offset any negative impacts on housing demand in October.”
It appears that almost all of last month’s 21.8 percent year-over-year increase in the Southland median sale price reflects rising home prices, while a small portion reflects a change in market mix. (This mix change consists of a large increase in mid- to high-end sales over the last year and a big decline in sales of lower-cost distressed properties.)
In October, the lowest-cost third of the region’s housing stock saw a 20.0 percent year-over-year rise in the median price paid per square foot for resale houses. The annual gain was 20.9 percent for the middle third of the market and 20.2 percent for the top, most-expensive third.
Sales activity in the middle and upper price ranges continued to outpace sales in more affordable markets.
Last month the number of homes sold from $300,000 through $800,000 – a range that includes many move-up buyers – rose 15.5 percent year-over-year. The number that sold for $500,000 or more jumped 28.5 percent from one year earlier, while $800,000-plus sales rose 32.9 percent.
In October, 32.1 percent of all Southland home sales were for $500,000 or more, down from a revised 33.2 percent of sales the month before and up from 23.7 percent a year earlier.
The number of Southland homes sold below $200,000 last month dropped 39.6 percent year-over-year, while sales below $300,000 fell 32.2 percent. Low-end deals have been relatively weak largely because of an inadequate supply of homes for sale. Many owners still can’t afford to sell their homes because they owe more than they are worth, and lenders aren’t foreclosing on as many properties, further limiting supply.
Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 6.3 percent of the Southland resale market in October. That was down from a revised 6.4 percent the month before and down from 16.3 percent a year earlier. Last month’s foreclosure resale rate was the lowest since it was 5.5 percent in May 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 12.9 percent of Southland resales last month. That was the lowest since October 2008, when it was 12.7 percent. Last month’s short sale figure was down from an estimated 13.3 percent the month before and down from 27.2 percent a year earlier.
Absentee buyers – mostly investors and some second-home purchasers – bought 26.5 percent of the Southland homes sold last month, which is the lowest share for any month since it was 25.1 percent in November 2011. Last month’s absentee level was down from a revised 26.9 percent the month before and down from 28.4 percent a year earlier. The absentee share has dropped each month this year since hitting a record 32.4 percent in January. The monthly average since 2000, when the absentee data begin, is 18.4 percent. Last month’s absentee buyers paid a median $316,000, up 1.9 percent from the month before and up 30.8 percent from a year earlier.
In October 6.5 percent of all Southland homes sold on the open market had previously sold in the prior six months. That’s up from a flipping rate of 6.1 percent in September and up from 6.0 percent in October 2012. Flipping peaked at 7.0 percent in February this year and had trended lower most months this year until September. (The figures exclude homes resold after being purchased at public foreclosure auction sales on the courthouse steps).
Buyers paying cash accounted for 27.5 percent of last month’s home sales, down from 28.5 percent the month before and down from 32.8 percent a year earlier. The cash share of purchases has declined each month since hitting an all-time peak of 36.9 percent this February, and in October was at its lowest level since it was 26.2 percent in September 2010. Since 1988 the monthly average for cash buyers is 16.3 percent of all sales. Cash buyers paid a median $337,000 last month, down 0.4 percent month-to-month and up 34.8 percent from a year ago.
Last month Southern California home buyers put $4.3 billion of their own money on the table in the form of a down payment or as an outright cash purchase. They borrowed $5.7 billion in mortgage money from lenders.
The most active lenders to Southern California home buyers last month were Wells Fargo with 8.1 percent of the purchase loan market, Bank of American with 2.7 percent and Prospect Mortgage with 2.2 percent.
There was little change in credit conditions month-to-month in October but the change from a year earlier was significant.
In October 12.0 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs) – the same as in September, exactly double the year-ago level, and the highest for any month since ARMs were 12.6 percent of the market in July 2008. Since 2000, a monthly average of about 31 percent of Southland purchase loans have been ARMs.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 26.3 percent of last month’s Southland purchase lending. That was down a hair from 26.5 percent the prior month and up from 20.7 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.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 19.7 percent of all purchase mortgages last month. That was up from 19.0 percent the month before and down from 25.7 percent a year earlier. In recent months the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have 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 $1,499, down from $1,547 the month before and up from $1,115 a year earlier. Adjusted for inflation, last month’s typical payment was 37.5 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 48.8 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.