Southland home sales hot inland, cool on coast; median price dips
May 19, 2009
La Jolla, CA---Southern California homes sold at a faster pace than a year ago for the 10th consecutive month in April as first-time buyers and investors continued to target distressed inland properties. After holding steady the first three months of this year, the median sale price fell slightly from March – a reminder of how delicate any short-term price stability could prove amid ongoing job cuts and foreclosures, a real estate information service reported.
A total of 20,514 new and resale houses and condos closed escrow in the six-county Southland last month. That was up 5.2 percent from 19,506 in March and up 31.4 percent from 15,615 a year ago, according to San Diego-based MDA DataQuick, a real estate information service.
Last month’s sales were the highest for that month since April 2006, when 27,114 homes sold, but were 18.2 percent below the average April sales total since 1988, when DataQuick’s statistics begin.
Foreclosure resales – homes sold in April that had been foreclosed on in the prior 12 months – accounted for 53.6 percent of all Southland resales last month. It was the seventh consecutive month in which post-foreclosure properties made up more than half of all resales.
The deep discounts associated with foreclosures have created stiff competition for builders, who last month sold the lowest number of newly constructed homes for an April since at least 1988.
At the same time, the number of single-family houses that resold last month was at record or near-record-high levels for an April in many of the more affordable, foreclosure-heavy inland markets. They included Palmdale, Lancaster, Moreno Valley, Perris, Indio, San Jacinto, Lake Elsinore and Victorville.
The sales picture was dramatically different in many older, high-end communities closer to the coast, where foreclosures and deep discounts are less common. Sales of existing houses remained at or near record lows for an April in markets such as Beverly Hills, Malibu, Palos Verdes Peninsula, Manhattan Beach and Pacific Palisades.
Among the reasons high-end sales remain so sluggish: The “jumbo” mortgages needed to buy such homes have been more expensive and much harder to obtain since August 2007, when the credit crunch hit. Before then, nearly 40 percent of Southland sales were financed with jumbo loans, then defined as over $417,000. Last month it was 10.9 percent.
In the more affordable inland areas, first-time buyers have relied heavily on government-insured FHA financing. Such loans were used to finance a near-record 39.1 percent of all Southland home purchases last month, up from 18.4 percent a year ago. In the Inland Empire, more than half of all April home purchases were financed with FHA loans.
Absentee buyers, including investors who will have their property tax bills sent to a different address, bought 18.6 percent of the Southland homes sold last month. That’s up from 17 percent a year ago and compares with a 15 percent monthly average since 2000.
Across the Southland, the median price paid for all homes combined last month was $247,000, down 1.2 percent from $250,000 in March and down 35.8 percent from $385,000 a year ago. Last month’s median was the lowest since it was $242,000 in February 2002, and was 51.1 percent below the peak $505,000 median reached in spring and summer of 2007.
The decline in the median sale price – the point where half of the homes sold for more and half for less – overstates the decline in the value of the typical home, given that so many of today’s sales involve a discounted foreclosure in a relatively affordable neighborhood. The dearth of high-end coastal sales means those higher sale prices are missing from the statistics, exacerbating the median’s decline.
A variety of price measures have shown prices flattening out or falling more slowly in recent months.
“In many markets we’ve seen signs you’d expect to see not long before prices would normally stabilize: robust investor and first-time-buyer activity, 10-plus months of year-over-year sales gains, and less price erosion, if any,” said John Walsh, MDA DataQuick president.
“The problem,” he continued, “is that we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on ‘option ARM’ and ‘stated income’loans used in mid-to high-end markets. Also of concern are reports of lenders holding back for many months before making a public foreclosure filing, which we track. If job cuts remain deep and foreclosures spike, then the past few months might later be viewed as nothing more than a brief calm before the next foreclosure storm.”
MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA 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 that Southern California buyers committed themselves to paying was $1,030 last month, down from $1,074 the previous month, and down from $1,831 a year ago. Adjusted for inflation, current payments are 52.9 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.4 percent below the current cycle's peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity remains near record levels, while financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable. Non-owner occupied buying has risen and is above-average in some markets, MDA DataQuick reported.
Source: DQNews.com Media calls: Andrew LePage (916) 456-7157 or John Karevoll
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