Bay Area home sales return to record low in May

June 18, 2008

La Jolla, CA.----After a record burst of activity between March and April, Bay Area home sales eased a bit last month to the slowest pace for a May in over 20 years. Sales were weakest in many higher-end coastal markets but rose well above year-ago levels in some inland areas where foreclosures and deep discounts lured bargain hunters.

A total of 6,216 new and resale houses and condos closed escrow in the nine-county Bay Area in May. That was down 1.5 percent from 6,310 in April, and down 23.1 percent from 8,080 in May 2007, DataQuick Information Systems reported.

Last month was the slowest May in DataQuick's statistics, which go back to 1988.

April had broken a seven-month string of record-low months that began after the credit crunch hit last August, where each month had the lowest sales for that particular month since 1988. April saw a record month-to-month sales increase of 28.8 percent from March. However, it appears at least a portion of the April gain was the result of escrows taking longer to close this year. Some sales that would normally have closed in March, seasonally a strong month, likely spilled into April.

In May, post-foreclosure homes continued to play a big role in the market. Across the nine-county region, 25.6 percent of the homes that resold had been foreclosed on at some point in the prior 12 months, down from 26 percent in April but up from 3.3 percent a year ago.

The impact was greatest in inland counties: Solano County's foreclosure resales were 57.6 percent of the resale market; in Contra Costa they were 43.3 percent and in Sonoma 26.6 percent. It was much different on the coast, where foreclosures resales were just 5.8 percent of the resale market in San Francisco and 4.5 percent in Marin County.

The median price paid for a Bay Area home was $517,000 last month, down 0.2 percent from $518,000 in April, and down a record 21.7 percent from $660,000 in May last year. May's median was 22.3 percent lower than the peak $665,000 median in June and July last year. The last time the median was lower than last month's $517,000 was back in September 2004, when it was $510,000.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Due to late data availability, the May statistics for Alameda County were extrapolated from the first three weeks of the month.

Of the Bay Area zip codes that posted year-over-year gains in existing single-family house sales last month, more than two-thirds were in relatively affordable stretches of Contra Costa, Solano and Sonoma counties. (Analysis excludes Alameda County). On average, their median sale prices in May were down 24 percent from a year ago and down 36 percent from their peaks.

Within these zips with annual sales gains, an average of nearly 50 percent of the resale transactions were foreclosure resales. Also in these zips, an average of 50 percent of the houses sold for less in May than during the prior sale - 35 percent less, on average, based on an analysis of all sales where a May 2008 and prior sale price were available in the public record.

"We're seeing it statewide: Inland markets hit hardest by foreclosures and falling prices are now the most likely to post higher sales than last year," said Andrew LePage, an analyst for DataQuick. "These communities have been attracting first-time buyers, first-time move-up buyers and investors. Prices are getting more in line with incomes and some people feel they're getting a good, or at least a much better, deal."

"It's much different in the more expensive coastal markets," he continued. "Prices are off their peaks but typically haven't fallen as much. Foreclosures aren't rampant and so far there's been much less motivation among sellers. But demand remains weak at today's prices, and the market continues to be hampered by the credit crunch."

Last summer's credit squeeze made jumbo mortgages (over $417,000) pricier and harder to get. In May the percent of Bay Area purchase loans over $417,000 rose to 30.6 percent, up from 28.8 percent in April but still less than half the level -- 63.5 percent -- seen a year ago. The jumbo share of purchase loans rose a bit more sharply last month in Santa Clara, San Mateo and Marin counties.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,393 last month, down from $2,407 the previous month, and down from $3,090 a year ago. Adjusted for inflation, current payments are 7.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 30.0 percent below the current cycle's peak in June 2006.

Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages is at a six-year low. Down payment sizes and flipping rates are stable, non-owner occupied buying activity has edged up, DataQuick reported.

	Sales Volume			Median Price
All homes	May-07	May-08	%Chng	May-07	May-08	%Chng
Alameda	1,631	1,186	-27.3%	$587,750	$475,000	-19.2%
Contra Costa	1,366	1,206	-11.7%	$590,000	$390,500	-33.8%
Marin	359	226	-37.0%	$850,000	$899,000	5.8%
Napa	112	105	-6.3%	$627,500	$475,000	-24.3%
Santa Clara	2,179	1,467	-32.7%	$713,500	$620,500	-13.0%
San Francisco	616	593	-3.7%	$835,000	$790,000	-5.4%
San Mateo	763	511	-33.0%	$807,000	$708,000	-12.3%
Solano	476	465	-2.3%	$435,000	$300,000	-31.0%
Sonoma	578	457	-20.9%	$519,500	$415,000	-20.1%
Bay Area	8,080	6,216	-23.1%	$660,000	$517,000	-21.7%