May 13, 2014
La Jolla, CA—Southern California’s housing market perked up a bit in April, with sales rising more than usual from March and dipping below a year earlier by the smallest degree in six months. Home prices edged higher again but at a slower pace, the result of more inventory, affordability constraints and less pressure from investors, a real estate information service reported.
A total of 20,008 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 13.4 percent from 17,638 sales in March, and down 6.6 percent from 21,415 sales in April last year, according to San Diego-based DataQuick.
On average, sales have increased 1.4 percent between March and April since 1988, when DataQuick’s statistics begin. Southland sales have fallen on a year-over-year basis for seven consecutive months, but last month’s decline was the smallest since sales fell 4.4 percent last October.
This April’s sales were higher than in April 2012 and 2011. That’s a significant change from February and March this year, which had the lowest home sales for those particular months in six years. Sales during the month of April have ranged from a low of 15,303 in 1995 to a high of 37,905 in 2004. Last month’s sales were 17.1 percent below the average – 24,133 – for all Aprils since 1988. March sales were 27 percent below average.
“The housing market’s pulse quickened a bit in April. If the inventory grows more, which we consider likely, it’s going to make it a lot easier for sales to reach at least an average level, which we haven’t seen in more than seven years. There are certainly factors undermining housing demand, including affordability constraints, credit challenges and less investment activity. But there are considerable forces fueling demand, too: Employment is rising, families are growing, and more people can qualify to buy again after losing a home to foreclosure or a short sale over the past eight years,” said Andrew LePage, a DataQuick analyst.
“There’s still pressure on home prices but it has moderated,” he said. “In April we logged the Southland’s lowest year-over-year gain in the median sale price – around 13 percent – since September 2012. In April last year the median rose 23 percent year-over-year. It’s tough to sustain that sort of price growth amid rising inventory, fewer investors, less-than-stellar income growth, higher mortgage rates and very limited availability of riskier ‘stretch’ financing.”
The median price paid for all new and resale houses and condos sold in the six-county region last month was $404,000, up 1.0 percent from $400,000 in March and up 13.2 percent from $357,000 in April 2013. Last month’s median was the highest since it was $408,000 in February 2008.
The median has risen on a year-over-year basis for 25 consecutive months. Those gains have been double-digit – between 10.8 percent and 28.3 percent – over the past 21 months. The 13.2 percent year-over-year gain in the median last month marked the lowest increase for any month since September 2012, when the $315,000 median rose 12.5 percent from a year earlier. Last month two counties – Orange and San Diego – saw single-digit, year-over-year gains in their medians.
April’s Southland median sale price stood 20.0 percent below the peak $505,000 median in spring/summer 2007.
DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick was acquired in March by Irvine-based property information company CoreLogic.
Home prices continue to rise at different rates depending on price segment. In April, the lowest-cost third of the region’s housing stock saw a 20.6 percent year-over-year increase in the median price paid per square foot for resale houses. The annual gain was 17.1 percent for the middle third of the market and 9.6 percent for the top, most-expensive third.
Last month the number of homes that sold for $500,000 or more increased 9.3 percent from one year earlier, while $800,000-plus sales rose 5.8 percent. Sales below $500,000 fell 11.4 percent year-over year, while sales below $200,000 plunged 35.1 percent.
In April, 35.1 percent of all Southland home sales were for $500,000 or more, down from a revised 35.6 percent the month before and up from 30.5 percent a year earlier.
The market impact of distressed properties continued to wane.
Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 5.9 percent of the Southland resale market in April. That was down from a revised 6.3 percent the prior month and down from 12.4 percent a year earlier. In recent months the foreclosure resale rate has been the lowest since early 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 5.4 percent of Southland resales last month. That was down from a revised 7.3 percent the prior month and down from 16.6 percent a year earlier.
Absentee buyers – mostly investors and some second-home purchasers – bought 26.1 percent of the homes sold last month, which is the lowest share since November 2011, when 25.1 percent of homes sold to absentee buyers. Last month’s figure was down from 27.7 percent in March and down from 30.6 percent a year earlier. The peak was 32.4 percent in January 2013, while the monthly average since 2000, when the absentee data begin, is 18.7 percent. Last month’s absentee buyers paid a median $350,000, up 22.8 percent year-over-year.
In April 4.8 percent of all Southland homes sold on the open market were flipped, meaning they had previously sold in the prior six months. That’s down from a flipping rate of 5.3 percent the prior month and it’s down from 6.0 percent a year earlier. The peak was 7.0 percent in February 2013. (The figures exclude homes resold after being purchased at public foreclosure auctions on the courthouse steps).
Buyers paying cash last month accounted for 26.7 percent of Southland home sales, down from 29.8 percent the month before and down from 34.4 percent in April last year. The peak was 36.9 percent in February 2013. Since 1988 the monthly average for cash buyers is 16.5 percent of all sales. Cash buyers paid a median $380,000 last month, up 26.7 percent from a year earlier.
In April, Southern California home buyers forked over a total of $4.48 billion of their own money in the form of down payments or cash purchases. That was up from a revised $4.35 billion in March and down from $4.91 billion a year earlier. The out-of-pocket total peaked last May at $5.41 billion.
Credit conditions appear to have eased in recent months.
In April 14.1 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs) – the highest share in six years and nearly double the ARM level of a year earlier. Last month’s figure was up from 13.2 percent in March and up from 7.9 percent in April 2013. The ARM rate dropped to as low as 1.9 percent in May 2009. 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 29.3 percent of last month’s Southland purchase lending. That was down a hair from 29.7 percent in March, which had the highest jumbo level for any month since the credit crunch struck in August 2007. Last month’s figure was up from 26.1 percent a year earlier. Prior to August 2007 jumbos accounted for around 40 percent of the home loan market. The Southland jumbo level dropped to as low as 9.3 percent in January 2009.
All lenders combined provided a total of $6.15 billion in mortgage money to Southern California home buyers in April, up from a revised $5.08 billion in March and up from $5.56 billion in April last year.
The most active lenders to Southern California home buyers last month were Wells Fargo with 7.3 percent of the total home purchase loan market, JP Morgan Chase with 3.9 percent and Bank of America with 2.8 percent.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 18.8 percent of all purchase mortgages last month. That was up from 18.4 percent the month before and down from 21.7 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.
The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,607, up from $1,591 the month before and up from $1,275 a year earlier. Adjusted for inflation, last month’s typical payment was 34.1 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 46.0 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.