Southland home sales back to record low; median price slips again  

June 16, 2008

La Jolla, CA--- Bargain shoppers helped push Southern California home sales higher in May compared with April - a normal, seasonal lift - but it was still the slowest May in more than 20 years. The median price paid fell a record 27 percent from a year ago, the result of sluggish high-end sales, more sellers dropping their asking prices and lenders selling off more of their aggressively priced, repossessed homes.

A total of 16,917 new and resale houses and condos closed escrow in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in May. That was up 8.3 percent from 15,615 in April but down 14.9 percent from 19,874 in May last year, according to DataQuick Information Systems.

Although last month's sales total was the highest for any month since August 2007, when 17,755 homes sold, it was still the lowest for a May in DataQuick's statistics, which go back to 1988. Last month was also 36.5 percent lower than the May average of 26,637 sales.

April sales had risen sharply from March and broken a seven-month string of record lows, where each month's sales had been the lowest for that particular month in DataQuick's statistics. However, a portion of April's sales was likely the result of escrows taking longer to close this year. Some deals that would normally have closed in March, a relatively strong month for seasonal reasons, probably spilled into April, bulking up its sales.

Sales of post-foreclosure homes continue to dominate many inland markets. Of all the Southland homes that resold in May, 37.4 percent had been foreclosed on at some point in the prior 12 months, compared with a revised 36.2 percent in April and 5.5 percent one year ago. Across the six-county area, these "foreclosure resales" ranged from 25.6 percent of resale activity in Orange County to 56.6 percent in Riverside County.

Relatively affordable areas with high levels of foreclosure resales and steep price depreciation were the most likely to post year-over-year increases in sales. Nearly two-thirds of the Southland zip codes that saw annual sales gains in May had a median sale price below $400,000, and about half of their combined sales were foreclosure resales, according to an analysis of resale single-family house transactions. On average, these zips saw their median price fall 27 percent from a year ago and 38 percent from their peaks.

Among all Southland resales in May, about 42 percent of homes sold for less than their prior sale price - about 34 percent less, on average, based on an analysis of sales where a full May 2008 and prior sale price were in the public record. Most of the prior sales occurred between early 2004 and mid 2006.

"What horsepower this market can generate right now is mainly fueled by bargain shopping, especially by first-time buyers and investors in inland areas," said Andrew LePage, an analyst for DataQuick. "Meanwhile, sales remain especially slow in most higher-end markets, with jumbo mortgages (over $417,000) making up only a slightly higher percentage of all purchase loans in May than in April. That doesn't bode well for the high-end, where so far prices have come off their peaks but have generally held up best."

The median price paid for a Southland home was $370,000 last month, down 3.9 percent from $385,000 in April and down 26.7 percent from the peak median of $505,000 in May 2007. That peak was reached several times in the spring and summer of last year. Last month's 26.7 percent annual decline in the median is the largest drop in DataQuick's statistics. The last time the median was lower than May's $370,000 was in March 2004, when it was $364,000.

The median has dropped mainly for two reasons: depreciation, especially in inland markets, and the sharp drop off in the past nine months of home sales financed with jumbo mortgages, previously defined as over $417,000. Before the credit crunch hit in August 2007, making jumbos pricier and harder to obtain, nearly 40 percent of Southland sales were financed with them. Last month jumbos accounted for just 15.8 percent of sales, up from 15.1 percent in April.

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 $1,664 last month, down from $1,716 the previous month, and down from $2,364 a year ago. Adjusted for inflation, the current payment is 22.1 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 36.2 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, DataQuick reported.

Sales Volume Median Price
All homes May 07 May 08 %Chng May 07 May 08 %Chng
Los Angeles 7,426 5,445 -26.70% $550,000 $422,000 -23.30%
Orange 2,675 2,266 -15.30% $635,000 $485,000 -23.60%
Riverside 3,307 3,444 4.10% $406,000 $290,000 -28.60%
San Bernardino 2,220 2,075 -6.50% $361,750 $250,250 -30.80%
San Diego 3,385 2,979 -12.00% $492,000 $380,000 -22.80%
Ventura 861 708 -17.80% $590,000 $435,000 -26.30%
SoCal 19,874 16,917 -14.90% $505,000 $370,000 -26.70%

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

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