Slow 2011 Start for Bay Area Housing Market

February 17, 2011

La Jolla, CA.----Bay Area home sales took their normal plunge from December last month but rose slightly from a year ago as prices edged lower. Although investors stayed quite active, many potential buyers and sellers continued to play a waiting game, while new-home sales dropped to the lowest level in more than two decades, a real estate information service reported.

A total of 4,966 new and resale houses and condos sold in the nine-county Bay Area last month. That was down 30.8 percent from 7,178 in December and up 2.3 percent from 4,853 in January 2010, according to San Diego-based DataQuick Information Systems.

A drop in sales from December to January is normal for the season, with the decline between those two months averaging 28.1 percent since 1988, when DataQuick’s statistics begin. Last month’s sales count was 19.2 percent below the January average of 6,148.

“January and February are the two months of the year that are the least predictive of upcoming trends. That said, last month’s activity was a continuation of trends we saw much of last year. The market is still dominated by distress sales and bargain hunting. We’re seeing little discretionary activity,” said John Walsh, DataQuick president.

A total of 253 newly built homes sold in the Bay Area last month, the least for any month in DataQuick’s statistics. The previous low was 264 in January 1993.

“Builders just can’t build homes that can compete in price with the bargains out there, especially foreclosure resales,” Walsh said.

The median price paid for all new and resale houses and condos in the Bay Area was $338,000 in January, down 9.9 percent from $375,000 in December and down 3.4 percent from $350,000 in January 2010.

The median has fallen year-over-year for four consecutive months, following 12 months of annual gains.

A drop in the median between December and January is not unusual, although last month’s 9.9 percent decline was the largest on record, following December-to-January dips of 7.9 percent last year and 9.1 percent the year before that. The average December-to-January decline in the median over the past two decades is 2.8 percent. Declines over the past few years have been relatively sharp mainly because, amid already low sales, there have been relatively high concentrations of investors and first-time buyers snapping up lower-cost homes over the holidays. Many of those transactions close in January and push the median lower.

The median peaked at $665,000 in June/July 2007 and dropped to a low of $290,000 in March 2009. Around half of the peak-to-trough drop was the result of a decline in home values, while the other half was a shift in the sales mix toward lower-cost homes.

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – rose in January to 34.7 percent of the Bay Area’s resale market – the highest since last February. Foreclosure resales have risen or stayed the same for six consecutive months. January’s figure was up from 30.1 percent in December but down from 36.3 percent in January 2010. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 15 years is about 9 percent.

Last month 29.8 percent of all sales were for $500,000 or more, down from a revised 34.3 percent in December and the lowest since 27.0 percent in April 2009. The all-time low was January 2009, when 22.7 percent of sales crossed that threshold. Over the past decade, a monthly average of 44.9 percent of homes sold for $500,000 or more.

Viewed differently, sales in zip codes representing the top one-third of the market, based on historical prices, accounted for 31.9 percent of all sales in January. That was down from 35.1 percent in December and up slightly from 30.8 percent a year ago. Those higher-end areas’ contribution to regional sales had dropped to as low as 18.0 percent in January 2009, while the peak was 44.7 percent in July 2007. Their 10-year average monthly contribution is 35.6 percent.

Government-insured FHA loans, a popular choice among first-time buyers, accounted for 25.0 percent of all home purchase mortgages in January, up from 23.2 percent in December but down from 26.8 percent in January 2010.

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

In January, 11.2 percent of the Bay Area’s home purchase loans were ARMs, up from a revised 9.6 percent in December and up from 7.4 percent a year ago. The Bay Area’s average monthly ARM rate over the last decade is 53 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 27.1 percent of last month’s purchase lending, down from a revised 31.6 percent in December, and down from 27.4 percent in January 2010. The post-housing-boom low was 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 23.3 percent of all Bay Area homes sold, up from 20.2 percent in December and 19.4 percent a year ago. The monthly average since 1988 is 16.5 percent.

Buyers who appeared to have paid all cash – meaning no corresponding purchase loan was found in the public record – accounted for 28.7 percent of sales in January, an all-time high. That was up from 24.4 percent in December and 25.9 percent a year ago. The average is 11.4 percent going back to 1988.

Home flipping trended a bit higher in January, when 2.7 percent of the houses and condos that sold on the open market had been bought and re-sold within a six-month period. That was up from a flipping rate of 2.2 percent in December and down from 2.9 percent a year earlier. Last month’s flipping rates varied from 1.2 percent in San Francisco to 4.2 percent in Sonoma County.

San Diego-based DataQuick Information Systems 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 $1,412, down from $1,558 in December, and down from $1,525 a year ago. Adjusted for inflation, last month’s payment was 47.1 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 60.9 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 Jan-10 Jan-11 %Chng Jan-10 Jan-11 %Chng
Alameda             936      969     3.5%   $341,000    $308,181     -9.6%
Contra Costa      1,078    1,092     1.3%   $257,250    $240,000     -6.7%
Marin               153      174    13.7%   $535,000    $500,000     -6.5%
Napa                 87      118    35.6%   $350,000    $315,000    -10.0%
Santa Clara       1,137    1,134    -0.3%   $451,000    $439,000     -2.7%
San Francisco       311      333     7.1%   $629,000    $590,250     -6.2%
San Mateo            355      372     4.8%   $579,000    $504,250    -12.9%
Solano              462      448    -3.0%   $201,000    $182,000     -9.5%
Sonoma              334      326    -2.4%   $325,000    $297,500     -8.5%
Bay Area          4,853    4,966     2.3%   $350,000    $338,000     -3.4%

Source: DataQuick Information Systems, www.DQNews.com

Media calls: Andrew LePage (916) 456-7157

Copyright 2011 DataQuick Information Systems. All rights reserved.
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