December 13, 2011
La Jolla, CA—The number of homes sold in Southern California rose modestly last month from both October and a year earlier as investors and first-time buyers targeted homes priced below $400,000. Sales above $500,000 fell nearly 16 percent from a year earlier amid a troubled market for larger home loans, a real estate information service reported.
A total of 16,884 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in November. That was up 0.3 percent from 16,829 in October and up 4.2 percent from 16,208 in November 2010, according to San Diego-based DataQuick.
More often than not, sales have dropped between October and November. On average, they have fallen 8.4 percent between those two months since 1988, when DataQuick’s statistics begin. On a year-over-year basis, Southland sales have increased for the past four months.
November sales have varied from a low of 13,173 in 2007 to a high of 31,987 in 1988. Last month’s sales were 22.7 percent lower than the November average of 21,832 transactions since 1988.
While November sales of existing (not new) houses and condos combined rose 5.8 percent from a year earlier, sales of newly built homes fell 15.2 percent to the lowest level on record for a November.
“’Tis still the season to go bargain hunting – or at least that’s what the November home sales data suggest. The portion of homes sold to investors continued to hover near an all-time high. Lower prices and amazingly low mortgage rates tempted those with the confidence to buy and the ability to qualify for a loan, or to pay cash,” said John Walsh, DataQuick president.
“But these sales levels remain subpar, with new-home sales stuck at record lows. Part of it is the economy and would-be buyers’ uncertainty – about jobs, home prices and a potential surge in foreclosed properties hitting the market. Part of it’s the folks who can’t move up because they’re upside down with their mortgages. And many who want to buy more expensive homes struggle with the financing.”
When viewed by price segment, sales trends varied considerably. The number of homes that sold for less than $400,000 last month rose 6.1 percent from a year earlier, while transactions above $500,000 fell 15.7 percent. Above $800,000, sales fell 17.6 percent year-over-year. November sales fell 22.8 percent from a year earlier in the $600,000-$750,000 range, which in coastal counties was impacted by the recent lowering of conforming loan limits.
Last month the median price paid for all new and resale Southland houses and condos sold was $275,000, up 1.9 percent from $270,000 in October but down 4.2 percent from $287,000 in November 2010.
The regional median has declined year-over-year for the past nine months – since March. San Bernardino County’s 2.3 percent year-over-year gain in its median sale price in November marked the first time since January this year that any Southland County posted an annual gain in its overall median.
Last month’s Southland median was 11.3 percent higher than the median’s low point in the current real estate cycle – $247,000 in April 2009 – but was 45.5 percent lower than the peak $505,000 median in mid 2007. The peak-to-trough drop was due to a decline in home values and a shift in sales toward lower-cost homes, especially inland foreclosures.
Distressed property sales accounted for 51.3 percent of the Southland resale market last month, down from 52.3 percent in October and down from 53.4 percent a year earlier. Nearly one out of three homes resold last month was a foreclosure, while roughly one in five was a “short sale.”
Foreclosure resales – properties foreclosed on in the prior 12 months – made up 31.7 percent of the Southland resale market in November, down from 32.8 percent in October and down from 35.2 percent a year earlier. Last month’s figure was the lowest since it was 28.6 percent in January 2008.
Short sales, where the sale price fell short of what was owed on the property, made up an estimated 19.6 percent of Southland resales last month. That was up from 19.5 percent in October and 18.2 percent a year ago. Two years ago the estimate was 16.8 percent. Last month’s figure was the highest since February this year, when it was 19.7 percent.
Credit conditions showed no signs of improvement last month, when the level of both adjustable-rate mortgages, or “ARMs,” and larger “jumbo” home loans were at a low point for this year.
Last month ARMs accounted for 6.1 percent of all Southland home purchase loans, down from 6.9 percent in October but up from 5.6 percent a year ago. Last month’s figure was the lowest since November 2010. Over the past 10 years, a monthly average of 37.0 percent of purchase loans were ARMs.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 14.6 percent of last month’s purchase lending. That tied October for the lowest level since January 2010, and was down from 17.9 percent a year ago. In the current housing cycle, jumbos fell in early 2009 to a low of 9.3 percent of the purchase market. Before the credit crunch hit in August 2007, jumbos accounted for about 40 percent of purchase loans.
Beyond the overall credit crunch, lower conforming loan limits that took effect Oct. 1 continued to impact the housing market last month. Lawmakers recently restored the higher limits, which vary by county, for FHA loans but not for mortgages guaranteed by Fannie Mae and Freddie Mac.
In Los Angeles and Orange counties, where the conforming loan limit was lowered from $729,750 to $625,500, the number of homes sold with purchase loans in that range totaled 58 in November, down 44.2 percent from October and down 84.1 percent from a year earlier. In October, sales with purchase loans in that range fell 71 percent from September and 71.5 percent from a year earlier.
The impact of restoring the higher loan limits for FHA loans isn’t clear. So far this year, about 14 percent of Los Angeles and Orange County purchase loans between $625,500 and $729,750 were FHA insured. Also unclear is the extent to which the private mortgage market will fill the void created by the lower conforming loan limits.
Last month 17.8 percent of all home sales were for $500,000 or more – the lowest portion since May 2009, when it was 17.4 percent. November’s share of $500,000-plus sales was down a hair from 17.9 percent in October and down from 21.1 percent a year earlier. The low point for $500,000-plus sales in this cycle was in January 2009, when only 13.8 percent of sales crossed that price threshold. Over the past 10 years, a monthly average of 27.9 percent of homes sold for $500,000 or more.
In the lower price ranges, many first-time buyers and others continued to rely on government-insured FHA loans, which allow a relatively low down payment. FHA loans accounted for 32.1 percent of purchase mortgages in November, up from 31.9 percent in October but down from 36.2 percent a year ago.
Absentee buyers, mainly investors and vacation-home buyers, purchased a near-record 24.8 percent of the Southland homes sold in November, paying a median $200,000. Last month’s absentee level was down from 25.4 percent of sales in October but up from 23.5 percent in November 2010. The absentee share of the market peaked this February at 26.4 percent. Over the last 10 years, absentee buyers purchased a monthly average of 16.8 percent of all homes sold.
Paying a median $205,000, cash buyers purchased 28.9 percent of all Southland homes sold in November, down from 30.0 percent in October and 29.1 percent a year ago. Cash purchases hit a high of 32.3 percent of sales this February, while the 10-year monthly average is 15.0 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.
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 Southland buyers committed themselves to paying was $1,049 last month, up from $1,040 in October but down from $1,175 in November 2010. Adjusted for inflation, current payments are 54.8 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 63.0 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 few years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
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