Southland home sales log tepid gain; record price drop

April 15, 2008

La Jolla, CA--- The onset of spring did little to thaw Southern California's semi-frozen housing market: The seasonal boost in sales between February and March was less than half its normal level and a record low. The weak start to the home buying season also saw another record dive in the median sales price, the result of depreciation, slow sales for higher-priced abodes and growing sales for discounted homes fresh out of foreclosure.

A total of 12,808 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March. That was up 18.8 percent from 10,777 the previous month but down 41.4 percent from 21,856 in March 2007, according to DataQuick Information Systems.

Over the past 20 years Southland sales have risen by an average of 38 percent between February and March. Last month's 18.1 percent increase from February was the lowest in DataQuick's statistics, which go back to 1988.

March was the seventh consecutive month in which sales have fallen to the lowest level on record for that particular month. On average, March sales have been about twice as high - 25,407 - as last month.

Foreclosure resales - houses sold after being foreclosed on – continue to dominate many inland neighborhoods. More than one out of three Southland homes that resold last month, nearly 38 percent, had been foreclosed on at some point in the prior year. This time last year such sales were only 8 percent of the market. At the county level, foreclosure resales ranged from 28.8 percent in Los Angeles County to 56.4 percent in Riverside County.

"We continue to believe a lot of people who could be buying or selling right now are opting to sit tight until they sense we've hit bottom. Often what we're left with, especially in inland areas, are sales driven by foreclosure or the threat of it. Although prices have fallen off their peaks in most places, the magnitude of the decline continues to vary widely, with the largest discounts concentrated in markets rife with foreclosure resales," said Marshall Prentice, DataQuick president.

In recent months, foreclosure resales typically sold for about 15 percent less than other homes in the surrounding area. When these foreclosure resales dominate a market, accounting for more than half of all sales, they tend to tug home prices down by an extra 5 to 10 percent when compared with communities where foreclosure resales are less common.

The median price paid for a Southland home was $385,000 last month, the lowest since $380,000 in April 2004. Last month's median was down 5.6 percent from February's $408,000, and down a record 23.8 percent from $505,000 in February 2007. That peak median of $505,000 was reached several times last spring and summer.

The sharp and sudden drop of the Southland median price reflects a combination of factors, mainly depreciation, especially in areas hammered by foreclosures, and a big shift in the types of homes selling. Since last August, when the continuing credit crunch hit, sales have plunged for more expensive homes financed with "jumbo" mortgages, which until recently were defined as loans over $417,000.

Sales financed with these larger loans, which the credit crunch made more expensive and harder to get, accounted for just 15 percent of Southland sales last month, down from about 40 percent a year ago. It is unclear how much home sales might be affected this spring and summer by the recent increases to the limits for so-called conforming loans and FHA loans.

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.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,816 last month, down from $1,821 the previous month, and down from $2,326 a year ago. Adjusted for inflation, the current payment is 12.6 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 28.3 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 risen in recent months, DataQuick reported.

All homes Mar-07 Mar-08 %Chng Mar-07 Mar-08 %Chng
Los Angeles 8,353    4,263   -49.0%   $540,000   $440,000   -18.50%
Orange 3,130    1,663   -46.9%   $629,000   $506,000   -19.60%
Riverside 3,680    2,691   -26.9%   $420,000   $306,250   -27.10%
San Bernardino 2,476    1,534   -38.0%   $369,000   $265,000   -28.20%
San Diego 3,218    2,108   -34.5%   $490,000   $395,000   -19.40%
Ventura    999       549   -45.0%   $566,750   $430,000   -24.10%
SoCal 21,856   12,808   -41.4%   $505,000   $385,000   -23.80%

Source: Media calls: Andrew LePage (916) 456-7157 or John Karevoll (909) 867-9534

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