Southland Home Sales Fall, Prices Flat

La Jolla, CA---Southern California home sales dropped in October to their lowest level in three years amid doubts about the drawn-out market recovery, tight mortgage lending policies and expired government incentives. The median price paid for a home rose on a year-over-year basis for the 11th consecutive month, but at this year’s slowest pace, a real estate information service reported.

A total of 16,744 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 7.4 percent from 18,091 in September, and down 24.3 percent from 22,132 for October 2009, according to MDA DataQuick of San Diego.

A drop from September to October is normal for the season. Last month’s sales were the lowest for an October since 2007, when 12,913 homes sold, and the second-lowest since 1988, when DataQuick’s statistics begin. Last month’s sales were 30.6 percent below the average October sales tally of 24,123.

“In addition to a lousy economy, the housing market still has a couple of nasty bottlenecks it has to contend with. First, sales of newly-built homes are at a low, mostly because builders can’t build at a low enough price to compete with the inventory of resale homes, many of which are short sales or foreclosures,” said John Walsh, MDA DataQuick president.

“Also, lenders still haven’t opened the mortgage money spigot for buying move-up and prestige properties. These properties have come down in value by about half as much as entry-level homes. But trying to finance a higher-end purchase can be a real grind, even for well-qualified buyers with a 20 percent down payment,” he said.

The median price paid for a Southland home was $283,000 in October. That was down 4.2 percent from $295,500 in September, and up 1.1 percent from $280,000 for October 2009. The 1.1 percent annual gain was the lowest since the median began rising year-over-year last December. The last time the median was lower than October’s $283,500 was in February this year, when it was $275,000.

The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The median’s peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially inland foreclosures.

Foreclosure resales accounted for 34.7 percent of the resale market last month, up from a revised 33.6 percent in September and down from 40.4 percent a year ago. The all-time high was February 2009 at 56.7 percent, DataQuick reported.

Government-insured FHA loans, a popular choice among first-time buyers, accounted for 35.8 percent of all mortgages used to purchase homes in October, up from 34.8 percent in September and down from 36.2 percent in October 2009.

Last month 20.2 percent of all sales were for $500,000 or more, down from 21.6 in September and up from 19.4 percent a year ago. The low point for $500,000-plus sales was in February last year, when 13.6 percent of sales crossed that threshold. Over the past decade, a monthly average of 26.4 percent of homes sold for $500,000 or more.

Viewed a different way, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 29.0 percent of existing single-family house sales last month, down from 31.1 percent in September but up from 28.1 percent a year ago. Over the last decade those higher-end areas have contributed a monthly average of 33.2 percent of regional sales. Their contribution to overall sales hit a low of 21.0 percent in January 2009.

High-end sales would be stronger if adjustable-rate mortgages (ARMs) and “jumbo” loans were easier to obtain. Both have become much more difficult to get since the the credit crunch hit three years ago.

While about 44 percent of all Southland purchase mortgages since 2000 have been ARMs, the figure was 5.4 percent last month, down from 5.5 percent in September and up from 4.0 percent in October last year.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.7 percent of last month’s purchase lending, down from 18.1 in September and up from 15.5 percent in October 2009. Before the August 2007 credit crisis, jumbos accounted for 40 percent of the market.

Absentee buyers – mostly investors and some second-home purchasers – bought 21.8 percent of the homes sold in October, paying a median $204,500. Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 27.1 percent of October sales, paying a median $200,000. In February this year, cash sales peaked at 30.1 percent. The 22-year monthly average for Southland homes purchased with cash is 14.2 percent.

The “flipping” of homes has generally trended higher over the past year. Last month the percentage of Southland homes bought and re-sold within a six-month period was 3.7 percent, the same as in September and up from 2.9 percent a year earlier. Last month’s flipping rates varied from as little as 3.0 percent in San Diego County to as much as 4.2 percent in Ventura County.

MDA 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 $1,111 last month, down from $1,177 for September, and down from $1,196 October a year ago. Adjusted for inflation, current payments are 50.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 59.4 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is very low, and down payment sizes are stable, MDA DataQuick reported.

Source: DQNews.com