Southland Home Sales Hit 6-Yr High; Median Edges Higher

September 13, 2012

La Jolla, CA---Southern California home sales rose to the highest level for the month of August in six years, fueled by low mortgage rates, a healthier move-up market and near-record levels of investor and cash buying. The median price paid for a home rose to a four-year high, lifted partly by the ongoing shift toward fewer foreclosure resales and more mid- to high-end deals, a real estate information service reported.

The median price paid for a home in the six-county Southland rose to $309,000 last month, up 1.0 percent from $306,000 in July and up 10.8 percent from $279,000 in August 2011, according to San Diego-based DataQuick.

Last month’s median price was the highest since the median was $330,000 in August 2008. The median has risen month-to-month for seven consecutive months and has increased year-over-year for the past five months.

Home prices have edged higher this year as greater demand, triggered by super-low mortgage rates and a mild economic recovery, has been met by a shrinking supply of homes for sale. But recent gains in the median sale price also reflect two other trends: a sharp drop in foreclosure resales, which often sell at a steep discount and are concentrated in lower-cost areas, as well as a substantial increase in mid- to high-end transactions.

It appears that close to half of the nearly 11 percent year-over-year gain in the Southland’s median sale price last month can be attributed to this shift in the types of homes selling. In August, price levels for the lowest-cost third of Southern California's housing stock rose 13.1 percent year-over-year, while they rose 6.1 percent in the middle and 2.6 percent in the top third.

In August, a total of 22,438 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was up 9.0 percent from 20,588 sales in July, and up 14.2 percent from 19,654 sales in August 2011.

Last month’s sales were 15.6 percent lower than the average sales tally of 26,588 for all the months of August since 1988, when DataQuick’s statistics begin. The low for August sales was 16,379 in 1992, while the high was 39,562 in 2003.

“August was the strongest month for home sales so far this year, and the strongest for an August in six years. That’s really saying something given the drop in low-end sales, especially foreclosure resales. Much of the pickup in activity reflects a continuation of trends we’ve seen for months, like the unleashing of pent-up demand in move-up markets and high levels of cash and investor buying. It will be interesting to see at what point cash purchases, which still account for close to a third of all sales, start to fade. In the meantime, strong seasonal forces should be kicking in now. Absent an unusual surge in demand this fall, sales will taper off over the next few months,” said John Walsh, DataQuick president.

The number of Southern California homes that sold in August for less than $200,000 fell 11.1 percent from a year earlier, while the number that sold for $200,000 to $400,000 rose 11.2 percent. Sales between $300,000 and $800,000 – a range that would include many move-up buyers – increased 23.4 percent year-over-year. Sales over $800,000 rose 19.3 percent from August 2011.

Last month 22.8 percent of all Southland sales were for $500,000 or more, down from 23.1 percent the month before and up from 20.1 percent a year earlier.

Distressed property sales – the combination of foreclosure resales and short sales – made up 36.8 percent of last month’s resale market. That was the lowest level since the figure was 36.0 percent in January 2008.

Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 19.2 percent of the Southland resale market last month, down from a revised 20.7 percent the month before and 32.4 percent a year earlier. Last month’s figure was the lowest since foreclosure resales were 18.8 percent of the resale market in November 2007. In the current cycle, the figure 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 17.6 percent of Southland resales last month. That was down from an estimated 18.7 percent the month before and it was the same as a year earlier.

Once again there were no signs of a major easing of credit conditions, though the share of purchase loans in the “jumbo” category remained higher in August than a year earlier.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 20.4 percent of last month’s purchase lending, up a hair from 20.2 percent the prior month and up from 17.2 percent a year ago. In recent months the jumbo share has been the highest since December 2007, when jumbos made up 21.7 percent of the purchase loan market. In the months leading up to the credit crisis that hit in August 2007, jumbos made up close to 40 percent of the market.

The use of adjustable-rate mortgages (ARMs) dipped slightly last month. ARMs made up 5.8 percent of home purchase loans in August, compared with 6.2 percent the month before and 8.5 percent a year earlier. Since 2000, a monthly average of about 34 percent of Southland purchase loans were ARMs.

The most active lenders to Southland home buyers last month were Wells Fargo with 9.2 percent of the market, Prospect Mortgage with 2.6 percent and with 2.5 percent. Bank of America, which had 7.6 percent of the market a year ago, was fourth with 2.4 percent of the purchase loan market.

Absentee buyers – mostly investors and some second-home purchasers – bought 27.0 percent of the Southland homes sold last month. That was down from 27.5 percent the prior month and up from 24.8 percent a year earlier. The record was 29.9 percent in February this year, while the monthly average since 2000 is 17.4 percent. Last month’s absentee buyers paid a median $235,000, up 17.5 percent from a year earlier.

Buyers paying with cash accounted for 31.6 percent of August home sales, down from 31.8 percent the month before and up from 28.5 percent a year earlier. Cash purchases peaked at 33.7 percent of all sales this February, and since 2000 the monthly average is 15.0 percent. Cash buyers paid a median $242,000 last month, up 14.3 percent from a year ago.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 26.9 percent of all purchase mortgages last month. August’s FHA level was down from 27.2 percent the month before and 31.8 percent a year earlier. The August FHA share was the lowest since August 2008, when it was 26.8 percent.

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 Southland buyers committed themselves to paying last month was $1,124, compared with $1,106 the month before and $1,101 a year earlier. Adjusted for inflation, last month’s typical payment was 52.1 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 60.8 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity, while above long-term averages, has been trending downward this year and is far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Sales Volume Median Price
All homes Aug-11 Aug-12 %Chng Aug-11 Aug-12 %Chng
Los Angeles 6,595 7,917 20.00% $315,000 $335,000 6.30%
Orange 2,780 3,337 20.00% $420,000 $445,000 6.00%
Riverside 3,643 3,520 -3.40% $190,000 $210,000 10.50%
San Bernardino 2,622 2,705 3.20% $150,000 $168,000 12.00%
San Diego 3,249 3,981 22.50% $320,000 $345,250 7.90%
Ventura 765 978 27.80% $355,000 $365,000 2.80%
SoCal 19,654 22,438 14.20% $279,000 $309,000 10.80%

Source: Media calls: Andrew LePage (916) 456-7157

Copyright 2012 DataQuick. All rights reserved.

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