Bay Area Housing Market Logs Higher Sales, Lower Prices

February 16, 2012

La Jolla, CA.----Bay Area home sales rose last month to the highest level for the month of January in five years, boosted by lower prices, ultra-low mortgage rates, a modestly improved economy and a record level of investor purchases. The median price paid for a home fell year-over-year for the 16th consecutive month as “distressed” sales rose to the highest level since early last year, a real estate information service reported.

A total of 5,479 new and resale houses and condos sold in the nine-county Bay Area in January. That was down 26.9 percent from 7,494 in December, and up 10.3 percent from 4,966 in January 2011. The year-over-year sales increase was the seventh in a row, according to San Diego-based DataQuick.

The December-to-January drop was normal for the season. On average, sales have fallen 28.0 percent between those two months since 1988, when DataQuick’s statistics begin. Last month’s sales were 10.5 percent below the average number of homes sold during January. Since 1988, January sales have varied from 3,586 in 2008 to 8,298 in 2005.

The median price paid for all new and resale houses and condos sold in the Bay Area last month was $326,000. That was down 2.8 percent from a revised $335,500 in December, and down 3.6 percent from $338,000 in January 2011. Last month’s median was the lowest since April 2009, when it was $304,000.

The median’s low point of the current real estate cycle was $290,000 in March 2009. The peak was $665,000 in June/July 2007. Around half of the median’s peak-to-trough drop was the result of a decline in home values, while the other half reflected a shift in the sales mix.

“While it’s clear prices have edged lower in some areas recently, last month’s Bay Area median of just $326,000 is a reflection of how skewed the market has become toward distressed, lower-cost properties. The higher-end sales have slowed in recent months as many struggle to qualify for loans and others just sit tight. This is also the time of year that we caution people not to try to read too much into the statistics. The winter numbers are based on a smaller pool of buyers and they haven’t proved very predictive,” said John Walsh, DataQuick president.

“Meanwhile, we’ll be watching to see how the purchase market might be impacted by the government’s recently announced efforts to help homeowners refinance, or otherwise avoid foreclosure. The federal-state settlement with five major banks reportedly calls for billions to be spent in California to help certain underwater homeowners reduce their principal or do a short sale. The state Attorney General says there are ‘incentives’ to ensure much of that money is spent in hard-hit counties ‘within the first year.’ What’s not clear is the extent to which these efforts will kick in during the first half of 2012, which could alter the course of some who are on the brink of foreclosure right now.”

Last month distressed property sales – the combination of foreclosure resales and “short sales” – rose to 51.9 percent of the Bay Area resale market. That’s up from 48.5 percent in December and down slightly from 54.5 percent in January 2011.

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 28.0 percent of resales in January. That was up from a revised 27.8 percent in December, and down from 35.0 percent a year earlier. 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.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 23.9 percent of Bay Area resales last month – the highest for the current housing cycle. That was up from 20.7 percent in December and up from 19.5 percent a year earlier.

Last month 27.4 percent of Bay Area sales were for $500,000 or more, down from a revised 29.6 percent in December, and down from 29.9 percent in January 2011. The low for the current cycle was January 2009, when just 22.7 percent of sales crossed the $500,000 threshold. Over the past 10 years, a monthly average of 47.6 percent of homes sold for $500,000-plus.

The number of homes sold for $500,000 or more last month fell 3.7 percent from January 2011, while sales under $500,000 rose 12.1 percent year-over-year.

Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 24.3 percent of all Bay Area home purchase mortgages in January, up from a revised 22.4 percent in December and down from 25.0 percent a year earlier.

One indicator of mortgage availability that had seen improvement last year dropped again in January, when 11.2 percent of the Bay Area’s home purchase loans were adjustable-rate mortgages, down from a revised 11.6 percent in December, and down from 11.3 percent in January 2011. Over the last 10 years, ARMs have accounted for a monthly average of 44.0 percent of purchase loans. ARMs hit a low of 3.0 percent of loans in January 2009.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 24.8 percent of last month’s purchase lending, down from a revised 26.5 percent in December, and down from 26.9 percent a year earlier. Jumbo usage dropped to 17.1 percent in January 2009. Before the credit crunch struck in August 2007, jumbos accounted for nearly 60 percent of the Bay Area purchase loan market.

Last month absentee buyers – mostly investors – purchased a record 25.4 percent of all Bay Area homes sold, up from 23.8 percent in December and 22.8 percent a year earlier. Absentee buyers paid a median $222,000 in January, down from $235,000 in December and $230,000 a year earlier.

Buyers who appear to have paid all cash – meaning no corresponding purchase loan was found in the public record – accounted for 30.0 percent of January sales, up from 27.2 percent in December, and up from 28.7 percent a year earlier. The record was 30.5 percent last February, while the monthly average going back to 1988 is 12.2 percent. Cash buyers paid a median $220,000 in January, down from $225,000 in December and up slightly from $217,500 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 Bay Area buyers committed themselves to paying last month was $1,233, down from $1,336 in December, and down from $1,412 a year earlier. Adjusted for inflation, last month’s typical payment was the lowest in DataQuick’s records back to 1988, and was 55.2 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 66.9 percent below the current cycle's July 2007 peak.

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 three years. Financing with multiple mortgages is low, down payment sizes are stable, DataQuick reported.

	Sales Volume			Median Price
All homes	Jan-11	Jan-12	%Chng	Jan-11	Jan-12	%Chng
Alameda	969	1,201	23.9%	$308,181	$295,000	-4.3%
Contra Costa	1,092	1,115	2.1%	$240,000	$235,000	-2.1%
Marin	174	191	9.8%	$500,000	$523,000	4.6%
Napa	118	93	-21.2%	$315,000	$332,500	5.6%
Santa Clara	1,134	1,183	4.3%	$439,000	$418,000	-4.8%
San Francisco	333	327	-1.8%	$590,250	$602,500	2.1%
San Mateo	372	438	17.7%	$504,250	$465,000	-7.8%
Solano	448	508	13.4%	$182,000	$179,750	-1.2%
Sonoma	326	423	29.8%	$297,500	$285,000	-4.2%
Bay Area	4,966	5,479	10.3%	$338,000	$326,000	-3.6%

Source: DataQuick, www.DQNews.com

Media calls: Andrew LePage (916) 456-7157