More Year-Over-Year Gains for Southland Home Sales and Prices

December 12, 2012

La Jolla, CA---Southern California’s housing market continued its gradual recovery last month, logging the highest November sales in six years amid strong demand from investors and move-up buyers. The median sale price rose nearly 17 percent from a year earlier, the result of price appreciation as well as the ongoing shift toward fewer foreclosure resales and more mid- to high-end activity, a real estate information service reported.

A total of 19,285 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 8.5 percent from 21,075 sales in October, and up 14.2 percent from 16,884 sales in November 2011, according to San Diego-based DataQuick.

A decline in sales from October to November is normal for the season. Last month’s sales were the highest for the month of November since 23,005 homes sold in November 2006, though they were 11.3 percent below the November average of 21,730 since 1988, when DataQuick’s statistics begin. The low for November sales was 13,173 in 2007, while the high was 31,987 in 1988.

The median price paid for a home in the six-county Southland was $321,000 last month, up 1.9 percent from $315,000 in October and up 16.7 percent from $275,000 in November 2011. The September, October and November medians are the highest since the median was $330,000 in August 2008. The Southland median has risen or held steady month-to-month for 10 consecutive months and has increased year-over-year for eight consecutive months.

The median and other price gauges are rising mainly for two reasons: First, higher demand, triggered largely by ultra-low mortgage rates, has coincided with a dwindling supply of homes for sale, which has pushed prices up. Second, the market is rebalancing: Discounted foreclosures are becoming a much smaller portion of sales, while more expensive move-up homes are responsible for a larger share of sales. This change in the market mix puts upward pressure on the median sale price.

“The government’s offered people an amazing gift in the form of extraordinarily low mortgage rates. But that’s not the only thing fueling these sales gains. Investor activity and cash purchases remain unusually high, and more buyers feel confident about their jobs, the economy, and the likelihood housing prices have bottomed and are likely to rise. We’re also seeing more non-distressed sales, where people sell at a profit and buy another house, triggering more move-up activity,” said John Walsh, DataQuick president.

Activity rose sharply in most mid- to-higher-cost markets in November. Home sales between $300,000 and $800,000 – a range that would include many move-up buyers – jumped 34.6 percent year-over-year. November sales over $500,000 rose 47.5 percent year-over-year, while sales over $800,000 rose 46.8 percent compared with November 2011.

Last month 24.1 percent of all Southland sales were for $500,000 or more, up from 23.7 percent in October, and up from 18.3 percent a year earlier. Last month’s level of $500,000-plus sales was the highest since July 2008, when it was 26.1 percent.

Lower-cost areas again posted the weakest sales compared with last year. The number of homes that sold below $200,000 fell 18.7 percent year-over-year, while sales below $300,000 dipped 7.8 percent. Sales in the more affordable markets have been hampered by the slowdown in foreclosure activity, which results in fewer foreclosed properties listed for sale. Also, lower-cost markets typically have a relatively high percentage of homeowners who owe more than their homes are worth, meaning they can’t sell and move.

While inventory and sales have declined in many of these lower-cost areas, higher demand has pushed prices up. In November, price levels for the lowest-cost third of Southern California's housing stock rose 24.4 percent year-over-year, while they increased 11.6 percent in the middle and 8.7 percent in the top third of the market.

Last month foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 15.3 percent of the Southland resale market. That was down from 16.3 percent the month before and 31.6 percent a year earlier. Last month’s level was the lowest since foreclosure resales were 13.6 percent of the resale market in September 2007. In the current cycle, foreclosure resales 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 26.6 percent of Southland resales last month. That was down slightly from an estimated 27.6 percent the month before and up from 25.4 percent a year earlier.

Credit conditions didn’t seem to change much in November, though the share of purchase loans above $417,000 edged higher.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 21.0 percent of last month’s Southland purchase lending, up from 20.7 percent the prior month and up from 14.6 percent a year earlier. 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 crunch that struck in August 2007, jumbos made up close to 40 percent of the market.

With rates on fixed 30-year loans so low, and aversion to risk in the marketplace so high, the use of adjustable-rate mortgages (ARMs) remains extraordinarily low in an historical context. Last month 5.7 percent of Southland home purchase loans were ARMs, compared with 6.0 percent in October and 6.2 percent a year earlier. Since 2000, a monthly average of about 33 percent of Southland purchase loans were ARMs.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 15.9 percent of all purchase mortgages last month. That was about even with 15.8 percent in October and down from 21.7 percent a year earlier. In recent months the FHA share has been the lowest since summer 2008. To some extent the decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers are having competing with investors.

The most active lenders to Southland home buyers last month were Wells Fargo with 8.3 percent of the market, Prospect Mortgage with 2.8 percent and with 2.3 percent.

Investors continue to account for a near-record share of sales.

Absentee buyers – mostly investors and some second-home purchasers – bought 28.3 percent of the Southland homes sold last month. That was about even with 28.4 percent the prior month and was up from 25.1 percent a year earlier. The record was 29.9 percent in February this year, while the monthly average since 2000 is 17.6 percent. Last month’s absentee buyers paid a median $254,523, up 27.3 percent from a year earlier.

Buyers paying with cash accounted for a near-record 33.0 percent of November home sales, up from 32.8 percent the month before and up from 29.5 percent a year earlier. Cash purchases peaked at 33.7 percent of all sales this February, and since 2000 the monthly average is 16.8 percent. Cash buyers paid a median $263,000 last month, up 27.1 percent from a year ago.

Not all investors pay cash, and not all cash buyers are investors. Last month about 62 percent of the Southland homes bought by absentee buyers were purchased with cash. About 54 percent of the homes purchased with cash were sold to absentee buyers.

Home flipping edged higher. Last month 6.2 percent of all homes sold had sold twice on the open market within a six-month period, up from 6.1 percent in October and up from 3.7 percent a year earlier.

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 $1,146, up from $1,115 the month before and up from $1,049 a year earlier. Adjusted for inflation, last month’s typical payment was 51.7 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 60.4 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, continues to drop 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 Nov-11 Nov-12 %Chng Nov-11 Nov-12 %Chng
Los Angeles 5,859 6,637 13.3% $308,000 $350,000 13.6%
Orange 2,297 2,879 25.3% $400,000 $450,000 12.5%
Riverside 2,971 3,274 10.2% $195,000 $229,000 17.4%
San Bernardino 2,378 2,304 -3.1% $155,500 $183,000 17.7%
San Diego 2,754 3,371 22.4% $315,000 $358,000 13.7%
Ventura 625 820 31.2% $349,550 $370,000 5.9%
SoCal 16,884 19,285 14.2% $275,000 $321,000 16.7%

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

Copyright 2012 DataQuick. All rights reserved.

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