Southland home sales rose slightly in October compared with a year earlier but were still nearly 30% below the long-term average. The region's median sale price dipped to its lowest level since January as activity above $500,000 fell sharply, distressed property sales rose slightly and mortgage availability worsened, a real estate information service reported.
A total of 16,829 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in October. That was down 7.3% from 18,149 in September and up 0.5% from 16,744 in October 2010, according to San Diego-based DataQuick.
A drop in sales between September and October is not unusual, but last month's decline was larger than the average change -- a decline of 0.7% -- between those months since 1988, when DataQuick's statistics begin.
October sales have varied from a low of 12,913 in 2007 to a high of 37,642 in 2003. Last month's sales were 29.3% below the October average of 23,819 transactions since 1988.
While October sales of existing (not new) houses and condos rose 2.2% and 1.3%, respectively, from a year earlier, sales of newly built homes dropped 18.4% to the lowest level on record for an October.
"For a few months now, lower prices and amazingly low mortgage rates have kept resale activity slightly ahead of last year. Of course, that's not saying a lot when you consider sales were 25 to 30% below average. The market continues to struggle with a difficult lending environment, uncertainty among potential buyers, underwater homeowners who can't move up, and a weak job market. The lower conforming loan limits implemented last month help explain the relatively sharp drop in mid- to high-end sales during October. Now we'll have to see if the private loan market can fill the void," said John Walsh, DataQuick president.
The conforming loan limits, which were reduced Oct. 1, vary by county. In Los Angeles and Orange counties, for example, the limit for FHA loans and mortgages guaranteed by Fannie Mae and Freddie Mac was lowered from $729,750 to $625,500. Home sales in those two counties that had purchase loans between $625,501 and $729,750 -- the band eliminated by the lower limit -- dropped to 102, down 71% from 350 sales in September and down 71.5% from 358 sales a year earlier.
When carved up by price segment, October sales varied considerably, with high-end activity dropping the most. The total number of sales last month for less than $300,000 rose 4.4% from a year earlier, while transactions in the $300,000 to $800,000 range fell 6.7% year-over-year and sales above $800,000 declined 22.0% from a year earlier (and dropped 29.4% from September). Viewed differently, the number of Southland deals over $500,000 fell 18.1% from a year ago.
Last month 17.4% of all sales were for $500,000 or more -- the lowest portion since May 2009, when it was also 17.4%. October's share of $500,000 -- plus sales fell from 20.4% in September and 20.8% a year earlier. The low point for $500,000-plus sales in this cycle was in January 2009, when only 13.8% of sales crossed that price threshold. Over the past 10 years, a monthly average of 27.5% of homes sold for $500,000 or more.
The median price paid for all new and resale Southland houses and condos purchased last month was $270,000 - the lowest for any month since January this year. Last month's median fell 3.6% from $280,000 in September and dropped 4.6% from $283,000 in October 2010.
The regional median has declined year-over-year for the past eight months -- since March. The last time any one of the six Southland counties posted an annual gain in its median sale price was in January, when San Bernardino logged a 1.0% year-over-year increase.
Last month's Southland median was 9.3% higher than the median's low point in the current real estate cycle 00 $247,000 in April 2009 - but was 46.5% 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 52.5% of the Southland resale market last month, up from 50.8% in September but down from 53.7% 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 32.8% of the Southland resale market in October, up from 32.3% in September but down from 34.7% a year earlier.
Short sales, where the sale price fell short of what was owed on the property, made up an estimated 19.7% of Southland resales last month. That was up from 18.5% in September and 19.0% a year ago. Two years ago the estimate was 15.9%. Last month's figure was the highest for any month since February this year, when it was also 19.7%.
Although mortgage rates were at record lows, credit conditions appeared to worsen in October, when the level of both adjustable-rate mortgages, or "ARMs," and larger home loans dropped to the lowest point this year.
Last month ARMs accounted for 6.9% of all Southland home purchase loans, down from 7.3% in September but up from 5.4% a year ago. Last month's figure was the lowest since last December, when ARMs made up 6.4% of all purchase loans. Over the past 10 years, a monthly average of 37.1% of purchase loans were ARMs.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 14.6% of last month's purchase lending, down from 17.8% in both September and a year earlier. Last month's figure was the lowest since jumbos made up 14.2% of purchase loans in January 2010. In the current cycle, jumbos fell in early 2009 to a low of 9.3% of the Southland purchase market. In 2007, before the credit crunch hit in August that year, jumbos accounted for about 40% of purchase loans.
Many first-time buyers and others continue to rely on government-insured FHA loans, which allow a relatively low down payment. FHA loans accounted for 31.9% of purchase mortgages in October, down from 32.4% in September and down from 35.8% a year earlier.
Paying a median $204,000, cash buyers purchased 29.4% of all Southland homes sold in October, up from 29.2% in September and 27.8% a year ago. Cash purchases hit a high of 32.3% of sales this February, while the 10-year monthly average is 14.5%. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.
Absentee buyers, mainly investors and vacation-home buyers, purchased a near-record 25.1% of the Southland homes sold in October, paying a median $200,000. Last month's absentee level was up from 24.6% of sales in September and 22.1% in October 2010. The absentee share of the market peaked this February at 26.4%. Over the last 10 years, absentee buyers purchased a monthly average of 16.7% of all homes sold.
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 $1,040 last month, down from $1,084 in September and $1,111 in October 2010. Adjusted for inflation, current payments are 55.4% below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 63.4% 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.
