Bay Area Home Sales Fall Sharply; Median Price Dips Below Last Year

November 18, 2010

La Jolla, CA.----Bay Area homes sold at the second-slowest pace for an October in more than two decades, the result of lost government stimulus, tight credit for pricier homes and lingering concerns about jobs and the economy. The region’s median sale price fell on a year-over-year basis for the first time in 13 months, a real estate information service reported.

A total of 6,122 new and resale houses and condos closed escrow in the nine-county Bay Area last month, down 3.3 percent from 6,334 in September and down 22.8 percent from 7,933 in October 2009, according to MDA DataQuick of San Diego.

Last month’s sales were the lowest for any October since 2007, when 5,486 homes sold, and the second-lowest since 1988, when DataQuick’s statistics begin. October sales fell 29.6 percent below the average October sales tally of 8,698. October sales hit their peak in 2003, when 13,392 homes sold.

“Part of what we’re seeing is the hangover effect from the expired home buyer tax credits, which spurred many to buy in the first half of the year. But that effect is fading. Now the real hurdles to more normal sales levels are the lack of meaningful job growth and the concerns many potential buyers have about job security and the overall economy. It’s why ultra-low mortgage rates, alone, haven’t turned things around,” said John Walsh, MDA DataQuick president.

“To really jumpstart the market, it’ll probably take a combination of at least the current level of affordability, a brighter economic outlook, and improved access to credit, especially for higher-cost homes.”

Last month the median price paid for all new and resale houses and condos combined in the Bay Area was $383,000, down 3.0 percent from $395,000 in September and down 1.8 percent from $390,000 in October 2009.

October broke a 12-month string of year-over-year gains in the median sale price, with those increases ranging from 1.8 percent to 31.0 percent. Last month’s year-over-year decline was the first since the median fell 8.8 percent, to $365,000, in September 2009.

So far this year, the median has peaked at $410,000, in both May and June.

Last month seven Bay Area counties logged year-over-year declines in their overall median sale prices, up from two counties to log such declines in September. Looking specifically at existing (not new) single-family detached houses, six counties – Contra Costa, Marin, Napa, San Francisco, San Mateo and Sonoma – saw their medians drop year-over-year, compared with three in September.

Last month the Bay Area’s overall median sale price of $383,000 stood 42.4 percent below the $665,000 peak in June/July 2007. The post-housing-boom low was $290,000 in March 2009. The regional median’s peak-to-trough plunge was caused by both a decline in home values and a huge shift in sales toward lower-cost homes, especially inland foreclosures.

Last month foreclosure resales – homes that had been foreclosed on in the prior 12 months – rose for the third consecutive month to 29.5 percent of the Bay Area’s resale market. That was up from 27.5 percent in September but down from 31.3 percent in October 2009. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 15 years is about 8 percent.

Government-insured FHA loans, a popular choice among first-time buyers, accounted for 25.6 percent of all home purchase mortgages in October, up from 24.1 percent in September and 25.2 percent in October 2009.

Last month 37.3 percent of all sales were for $500,000 or more, down a tad from 37.8 percent in September but up from 36.9 percent a year ago. The low point for $500,000-plus sales was January 2009, when 22.7 percent of sales crossed that threshold. Over the past decade, a monthly average of 46.8 percent of homes sold for $500,000 or more.

Viewed differently, sales of existing single-family houses in zip codes representing the top one-third of the market, based on historical prices, accounted for 34.0 percent of all sales in September. That’s up from 33.1 percent in September and 30.8 percent a year ago. Those higher-end areas’ contribution to regional sales had dropped as low as 18.0 percent in January 2009, while the peak was 44.7 percent in July 2007. The 10-year average contribution is 33.1 percent.

Sales of higher-cost homes continue to suffer from the credit crunch that struck three years ago, making adjustable-rate mortgages (ARMs) and “jumbo” loans much more difficult to obtain.

In October, 9.1 percent of the Bay Area’s home purchase loans were ARMs, the same as in September but up from 7.6 percent a year ago. The Bay Area’s average monthly ARM rate over the last decade is nearly 50 percent. ARMs hit a low of 3.0 percent in January 2009.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 33.8 percent of last month’s purchase lending, up from 33.6 percent in September, 30.9 percent in October 2009, and a post-housing-boom low of 17.1 percent in January 2009. However, before the August 2007 credit crunch, jumbos accounted for nearly 60 percent of the Bay Area purchase loan market.

Last month absentee buyers – mostly investors – purchased 19.8 percent of all Bay Area homes sold, compared with 15.9 percent a year ago and a decade-long average of 13.2 percent. Buyers who appeared to have paid all cash – meaning there was no corresponding purchase loan found in the public record – accounted for 25.5 percent of sales in October, up from 22.6 percent a year ago and a decade-long average of 11.4 percent.

Home flipping has generally trended higher this year. In October, 2.5 percent of the homes that sold on the open market had been bought and re-sold within a six-month period. That was up from a Bay Area flipping rate of 2.4 percent in September and 2.0 percent a year earlier. Last month’s flipping rates varied from 1.1 percent in Napa County to 3.9 percent in Sonoma County.

San Diego-based 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. Because of late data availability, sales were estimated in Alameda and San Mateo counties.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $1,504, down from $1,573 the previous month, and down from $1,578 a year ago. Adjusted for inflation, last month’s payment was 43.5 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 58.3 percent below the current cycle's peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but below peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above average, MDA DataQuick reported.


Sales Volume Median Price
All homes Oct-09 Oct-10 %Chng Oct-09 Oct-10 %Chng
Alameda         1,555 1,252 -19.50% $369,000 $365,000 -1.10%
Contra Costa    1,679 1,333 -20.60% $280,000 $260,000 -7.10%
Marin           264 205 -22.30% $648,000 $630,000 -2.80%
Napa            121 91 -24.80% $360,000 $307,000 -14.70%
Santa Clara     1,944 1,374 -29.30% $500,000 $502,500 0.50%
San Francisco   553 436 -21.20% $690,824 $652,000 -5.60%
San Mateo       586 528 -9.90% $580,000 $561,250 -3.20%
Solano          681 517 -24.10% $195,000 $205,500 5.40%
Sonoma          550 386 -29.80% $331,000 $309,000 -6.60%
Bay Area        7,933 6,122 -22.80% $390,000 $383,000 -1.80%

Source: MDA DataQuick Information Systems, www.DQNews.com

Media calls: Andrew LePage (916) 456-7157

Copyright 2010 DataQuick Information Systems. All rights reserved.
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