November 13, 2013
La Jolla, CA.–The Bay Area housing market continued its fits-and-starts march toward normalcy last month with ho-hum sales counts and continued price appreciation. Various below-the-surface technical indicators show a market still transitioning from a severely atypical state a few years ago to something more in line with long-term norms, a real estate information service reported.
A total of 7,595 new and resale houses and condos sold in the nine-county Bay Area in October. That was up 6.4 percent from 7,141 the month before, and down 3.9 percent from 7,902 for October a year ago, according to San Diego-based DataQuick.
Last month’s number was 11.2 percent below the October average of 8,553 since 1988, when DataQuick’s statistics begin. Bay Area sales haven’t been above average for any particular month in more than seven years. The most active October was in 2003 when 13,392 homes sold; the least active was in 2007 with 5,486 sales.
The median price paid for a home in the Bay Area last month was $539,750. That was up 1.8 percent from $530,000 in September, and up 29.7 percent from $416,000 in October 2012.
It appears that roughly three-fourths of last month’s 29.7 percent year-over-year rise is the result of an increase in home values. The rest reflects a change in market mix – more mid- to high-end sales and fewer low-cost inland distressed sales.
The peak Bay Area median so far this year was $562,000 in July – the highest for any month since the median was $587,500 in December 2007. The Bay Area’s all-time peak median was $665,000 in June and July 2007, after which it dropped to a low of $290,000 in March 2009.
“At different times in recent years we’ve had various peaks or troughs when it comes to sales volume, prices, foreclosure activity, cash sales, absentee-owner sales, various home loan options, you name it. All of these market components are now trending toward normal. We are still a ways away, but the market is slowly re-establishing equilibrium,” said John Walsh, DataQuick president.
“A lot of market drag can be attributed to skittish market participants, especially buyers and lenders. Comfort levels do rise with more stability and predictability – factors that could contribute to increased activity well into next year and beyond,” he said.
The number of homes sold for less than $500,000 dropped 26.4 percent year-over-year, while the number sold for more increased 15.9 percent, DataQuick reported.
Last month distressed property sales – the combination of foreclosure resales and “short sales” – made up about 14 percent of the resale market. That was about the same as in September and down from about 35 percent a year ago.
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 3.6 percent of resales in October, the same as the month before, and down from 11.7 percent a year ago. Last month’s level is the lowest since 3.5 percent in June 2007. Foreclosure resales peaked at 52.0 percent in February 2009, while the monthly average over the past 17 years is 10 percent.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 10.3 percent of Bay Area resales last month. That was up from an estimated 10.2 percent in September and down from 22.9 percent a year earlier.
In October, Bay Area home buyers put $2.1 billion of their own money on the table in the form of a down payment or as an outright cash purchase. That number hit an all-time high of $2.6 billion in May. They borrowed $3.0 billion in mortgage money from lenders last month.
The most active lenders to Bay Area home buyers last month were Wells Fargo with 14.8 percent of the purchase loan market, RPM Mortgage with 3.8 percent and Stearns Lending with 3.6 percent.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 46.7 percent of last month’s purchase lending, roughly even with a revised 46.8 percent in September, and up from 39.5 percent a year ago. Jumbo usage dropped as low as 17.1 percent in January 2009.
Adjustable-rate mortgages (ARMs), an important indicator of mortgage availability, accounted for 20.5 percent of the Bay Area’s home purchase loans in October. That was the highest since 20.7 percent in August 2008. It was up from a revised 20.2 percent in September, and up from 11.8 percent in October last year. Since 2000, ARMs have accounted for 47.5 percent of all purchase loans. ARMs hit a low of 3.0 percent of loans in January 2009.
Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 11.0 percent of all Bay Area home purchase mortgages in October, up from a 10.5 percent in September and down from 15.8 percent a year earlier.
Last month absentee buyers – mostly investors – purchased 21.8 percent of all Bay Area homes. That was up from 20.8 percent in September, and down from 23.7 percent a year ago. Absentee buyers paid a median $420,000 in October, up 28.6 percent from a year earlier.
Buyers who appear to have paid all cash – meaning no sign of a corresponding purchase loan was found in the public record – accounted for 22.8 percent of sales in October. That was down from 23.0 percent the month before and down from 29.6 percent a year earlier. The monthly average going back to 1988 is 13.3 percent. Cash buyers paid a median $439,500 in October, up 33.2 percent from a year earlier.
San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Because of late data availability, sales were estimated in Alameda, San Francisco and San Mateo counties.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $2,109. Adjusted for inflation, last month’s payment was 26.1 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 45.4 percent below the current cycle’s peak in July 2007. It was 67.3 percent above the February 2012 bottom of the current cycle.
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.