Bay Area Home Sales Drop to Six-Year Low; Prices Still Up Sharply Yr/Yr

January 15, 2014

La Jolla, CA.-----Last month’s Bay Area home sales were the slowest for a December in six years, the result of a constrained supply of homes for sale. Prices continued to rise on a year-over-year basis, although at a slower pace than earlier in 2013, a real estate information service reported.

A total of 6,714 new and resale houses and condos sold in the nine-county Bay Area last month. That was the lowest for any December since 2007, when 5,065 homes sold. Last month’s sales were up 0.8 percent from 6,659 in November, and down 12.7 percent from 7,688 in December 2012, according to San Diego-based DataQuick.

Sales almost always increase from November to December, usually around 8 percent. Last month’s sales were 21.3 percent below the December average of 8,529 since 1988, when when DataQuick’s statistics begin. Bay Area sales haven’t been above average for any particular month in more than seven years. The most active December was in 2003 when 12,349 homes sold, while the least active was in 2007, when 5,065 sold.

The median price paid for a home in the Bay Area last month was $548,500. That was 0.3 percent lower than $550,000 in November, and 23.9 percent above $442,750 for December 2012. While the median has been at roughly the current level since last summer, it has increased year-over-year for 21 consecutive months.

The Bay Area median peaked at $665,000 in June and July 2007, then dropped to a low of $290,000 in March 2009. While much of the median's ups and downs in recent years can be attributed to shifts in the types of homes sold, it now appears most of the current year-over-year gain reflects a rise in home values.

For 14 consecutive months the Bay Area median has risen more than 20 percent on a year-over-year basis.

“If current trends hold, including year-over-year price appreciation of 20-plus percent, the typical home would be selling for $50,000 to $60,000 more by spring. Perhaps twice that at the upper end of the market. That could loosen up quite a bit of inventory. The question then is, how much of the pent-up demand that accumulated during the down years is still there? An additional issue is the fussy mortgage market, although things are moving in the right direction there, slowly,” said John Walsh, DataQuick president.

Adjustable-rate mortgages (ARMs), an important indicator of mortgage availability, accounted for 22.0 percent of the Bay Area’s home purchase loans in December. That was up from 20.0 percent in November, and up from 11.0 percent in December 2012. It was the highest since 25.4 percent in July 2008. ARMs hit a low of 3.0 percent of loans in January 2009. Since 2000, ARMs have accounted for 47.2 percent of all Bay Area purchase loans.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 49.2 percent of last month’s purchase lending, down slightly from a revised 49.8 percent in November, and up from 40.1 percent a year ago. Jumbo usage dropped to as low as 17.1 percent in January 2009. Before the credit crunch hit in August 2007, jumbos accounted for more than 60 percent of Bay Area purchase loans.

Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 11.3 percent of all Bay Area home purchase mortgages in December, up from 10.4 percent in November and down from 13.8 percent a year earlier. In recent months the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers.

Last month the number of homes that sold for less than $500,000 dropped 28.9 percent year-over-year, while the number that sold for more increased 12.3 percent, DataQuick reported.

Distressed property sales – the combination of foreclosure resales and “short sales” – made up about 15.0 percent of the resale market last month. That was up from 13.2 percent the prior month and down from 35.7 percent a year earlier.

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 4.5 percent of resales in December, up from 3.7 percent the month before, and down from 12.1 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is 10 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 10.5 percent of Bay Area resales last month. That was up from an estimated 9.5 percent in November and down from 23.6 percent a year earlier.

Last month absentee buyers – mostly investors – purchased 23.0 percent of all Bay Area homes. That was up from November’s revised 20.6 percent and down from 26.0 percent in December 2012. Absentee buyers paid a median $439,000 last month, up 35.1 percent from $325,000 a year earlier.

Buyers who appear to have paid all cash – meaning no sign of a corresponding purchase loan was found in the public record – accounted for 22.5 percent of sales in December, up from a revised 22.1 percent in November and down from 29.9 percent a year earlier. The monthly average going back to 1988 is 13.3 percent. Cash buyers paid a median $468,500 in December, up 48.3 percent from a year earlier.

In December, Bay Area home buyers put $1.72 billion of their own money on the table in the form of a down payment or as an outright cash purchase. That number hit an all-time high of $2.64 billion last May. They borrowed $2.56 billion last month in mortgage money from lenders.

The most active lenders to Bay Area home buyers in December were Wells Fargo with 13.0 percent of the purchase loan market, Bank of America with 4.5 percent and Stearns Lending with 3.8 percent.

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 that Bay Area buyers committed themselves to paying last month was $2,219. Adjusted for inflation, last month’s payment was 22.1 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 42.5 percent below the current cycle's peak in July 2007. It was 76.3 percent above the February 2012 bottom of the current cycle.

Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and 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 Dec-12 Dec-13  % Chng   Dec-12 Dec-13  % Chng  
Alameda             1,475      1,410     -4.4%     $410,000     $525,000      28.0%
Contra Costa        1,530      1,177    -23.1%     $333,500     $405,000      21.4%
Marin                 291        220    -24.4%     $660,750     $755,000      14.3%
Napa                  129        111    -14.0%     $350,000     $425,000      21.4%
Santa Clara         1,822      1,578    -13.4%     $544,500     $625,000      14.8%
San Francisco         643        529    -17.7%     $720,000     $813,000      12.9%
San Mateo             633        747     18.0%     $600,000     $750,000      25.0%
Solano                610        477    -21.8%     $218,000     $272,000      24.8%
Sonoma                555        465    -16.2%     $345,000     $415,000      20.3%
Bay Area            7,688      6,714    -12.7%     $442,750     $548,500      23.9%

Source: DataQuick, www.DQNews.com

Media calls: Andrew LePage (916) 456-7157

Copyright 2014 DataQuick. All rights reserved.
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