Southland home sales ease but still beat '07; median falls below $300K

December 16, 2008

La Jolla, CA---Southern California home sales outpaced last year for the fifth consecutive month in November, when 55 percent of buyers in the resale market chose repossessed homes. The abundance of discounted foreclosures helped push the median sale price down a record 35 percent from a year ago, a real estate information service reported.

A total of 16,720 new and resale houses and condos closed escrow in the six-county Southland last month. That was down 22.3 percent from 21,532 in October but up 26.9 percent from 13,173 in November 2007, according to San Diego-based MDA DataQuick.

On the surface, last month's sales look much weaker than in the prior two months: November's 26.9 percent year-over-year sales increase compares with annual gains of 64.6 percent in September and 66.7 percent in October. Moreover, the 22.3 percent drop in sales between October and November was a record and compares with an average October-to-November decline of just 7.4 percent since 1988, when DataQuick's statistics begin.

But November also had an unusually low number of business days when transactions could be recorded. Most counties had 17 business days last month, compared with 22 in October and at least 19 in most Novembers over the past 20 years. In most counties, the Thanksgiving and Veterans Day holidays resulted in three fewer business days last month, plus this November started and ended on a weekend.

Last month appears stronger when viewed this way: Its average number of transactions recorded daily was only about 1 percent lower than the daily average in October, which had the highest number of sales for any month so far this year.

"Bargains and bargain hunters have kept this market alive through some of the bleakest financial news in memory. There's this renewed sense that you can score a 'deal' - something that had been missing for many years. Last month's Southland sales weren't great, given they were the second-lowest for any November in 16 years. But they could have been a lot worse," said John Walsh, DataQuick president.

"Many first-time homebuyers are, understandably, cheering as foreclosures dominate sales, tugging down prices and raising affordability," he continued. "For home sellers and the industry, though, one concern over foreclosures representing half of all sales is that those transactions simply repay lenders. They don't trigger a move-up purchase."

The median price paid for all homes combined last month was $285,000, down 5 percent from October and down a record 34.5 percent from November 2007. Last monthâ€™s median was the lowest since it was $298,000 in April 2003, which was the last time the median was below $300,000. November's median stood 43.6 percent below the peak $505,000 median reached in spring and summer of last year.

The median price has eroded consistently over the past 16 months as price depreciation swept the region, discounted foreclosures ballooned in inland markets and sales stagnated in higher-end neighborhoods. The latter have suffered from, among other things, a difficult financing environment for large mortgages.

Foreclosures have accounted for about half of all Southland resales during the past three months. In November, 54.6 percent of all the homes that resold had been foreclosed on at some point in the prior 12 months. That's up from 50.9 percent in October and 18.8 percent a year ago.

At the county level, these "foreclosure resales" ranged from 44.1 percent of November existing home sales in Los Angeles County to 70.4 percent in Riverside County. In Orange County foreclosure resales were 44.2 percent of sales; in San Diego 52.1 percent; San Bernardino 67.8 percent and in Ventura County 47.8 percent.

Since summer, many inland markets rife with discounted foreclosures have seen sales double or more from last year thanks to increased affordability. Most zip codes with such gains have a median resale house price under $260,000, and that median has fallen at least 35 percent from a year ago. About half of all buyers in such inland areas are using government-insured, FHA financing.

Conversely, November sales fell from last year in areas typically near the coast, with a median over $500,000 and an annual price drop below 20 percent. Well under 30 percent of the sales are FHA-financed.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA 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 that Southern California buyers committed themselves to paying was $1,323 last month, down from $1,413 the previous month, and down from $2,049 a year ago. Adjusted for inflation, current payments are 37.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 48.7 percent below the current cycle's peak in June 2006.

Indicators of market distress continue to move in different directions. Foreclosure activity has waned recently but remains near record levels, while financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat overall but is above-average in some markets, MDA DataQuick reported.

	Sales Volume			Median Price
All homes	Nov-07	Nov-08	%Chng	Nov-07	Nov-08	%Chng
Los Angeles	4,468	5,037	12.70%	$499,000	$340,000	-31.90%
Orange	1,567	2,177	38.90%	$582,750	$400,000	-31.40%
Riverside	2,503	3,719	48.60%	$356,500	$220,000	-38.30%
San Bernardino	1,719	2,385	38.70%	$330,000	$185,250	-43.90%
San Diego	2,400	2,673	11.40%	$440,000	$305,000	-30.70%
Ventura	516	729	41.30%	$521,250	$355,000	-31.90%
SoCal	13,173	16,720	26.90%	$435,000	$285,000	-34.50%