Real estate sales in Southern California made strong month-on-month gains in December, as is the norm, but still fell shy of the gains seen at the same time in 2010. DataQuick reports sales up 14% for the month, but down 1.4% when compared to last year as many prospective buyers wait for signs of a strengthening market and sellers wait for prices to improve. Analysts believe there are signs of an improving market although credit options remain limited and the majority of sales are made in the distressed-home market that includes foreclosures and short sales. For more on this continue reading the following article from TheStreet.
Southern California home sales surged last month from November — as they normally do — amid relatively strong activity under $300,000 and a record share of sales to "absentee" buyers, mainly investors.
But with the purchase plans of many ordinary buyers and sellers still on hold, the year-end rush couldn’t lift sales above December 2010. Moreover, investors’ focus on lower-cost homes helped push the median sale price back down to its 2011 low point, a real estate information service reported.
A total of 19,247 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in December. That was up 14.0% from 16,884 in November but down 1.4% from 19,528 in December 2010, according to San Diego-based DataQuick.
While December sales of existing (not new) houses and condos combined fell 0.5% from a year earlier, sales of newly built homes fell 12% year over year, to the lowest level on record for a December.
"Last year ended much the way it began, with pitifully low new-home sales, record investor activity, drum-tight credit, and lots of potential buyers and sellers just sitting tight," said John Walsh, DataQuick president.
"Some of the economic vital signs have improved lately and it’s sparked a renewed sense of optimism in housing circles," he said. "Coupled with incredibly low mortgage rates, it certainly suggests 2012 might offer the ‘rock bottom’ for pricing that many buyers and sellers have been waiting for. But the housing drama isn’t over. Credit conditions remain horrible, leaving many unable to take advantage of today’s improved affordability. And lenders still must decide the fate of scores of borrowers who aren’t making their mortgage payments."
Last month the median price paid for all new and resale Southland houses and condos sold was $270,000, down 1.8% from $275,000 in November and down 6.9% from $290,000 in December 2010. Last month’s $270,000 median matched January and October for the lowest level of 2011. The regional median has declined year-over-year for the past 10 months – since last March.
Distressed property sales accounted for 52.5% of the Southland resale market last month, up from 51.2 % in November but down from 53.8% a year earlier. Nearly one out of three homes resold last month was a foreclosure, while about one in five was a "short sale."
Foreclosure resales – properties foreclosed on in the prior 12 months — made up 32.5% of the Southland resale market in December, up from 31.6% in November but down from 35.1% a year earlier.
Short sales, where the sale price fell short of what was owed on the property, made up an estimated 20% of Southland resales last month. That was up from 19.6% in November and 18.7% a year earlier. Two years ago the estimate was 17.6%. Last month’s figure was the highest since June 2010, when it was 20.5%.
Credit conditions remained difficult last month, though there were small increases in the %age of home purchase loans that were either adjustable-rate mortgages ("ARMs"), or larger "jumbo" loans.
Last month ARMs accounted for 6.5% of home purchase loans, up from 6.1% in November and the same as a year earlier. Over the past 10 years, a monthly average of 36.9% of purchase loans were ARMs.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 15.3% of last month’s purchase lending. That was up from 14.6% in November but down from 17.4% a year earlier. In the current housing cycle, jumbos fell in early 2009 to a low of 9.3% of the purchase loan market. Before the credit crunch hit in August 2007, jumbos accounted for about 40% of purchase loans.
In addition to the broader, years-old credit crunch, lower conforming loan limits that took effect on Oct. 1, 2011, impacted the housing market. Lawmakers have since restored the higher limits, which vary by county, for FHA loans but not for mortgages guaranteed by Fannie Mae and Freddie Mac.
Last month saw higher levels of lending in the affected loan ranges. For example, 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 104 in December, up 76.3% from November but still 73.2% lower than a year earlier. Prior to the change in conforming loan limits on Oct. 1, the combined two-county area saw an average of about 340 loans a month last year between $625,501 and $729,750. It remains unclear whether, in the short run, the private mortgage market will begin to fill the void created by the lower conforming loan limits.
Absentee buyers, mainly investors and vacation-home buyers, purchased a record 26.4% of the Southland homes sold in December, paying a median $200,000. Last month’s absentee level matched the peak first reached in February 2011. The December absentee figure was up from 25.1% in November and up from 23.4% a year earlier. Since 2000, when this data series begins, absentee buyers have purchased a monthly average of 16.9% of all homes sold.
Paying a median $202,500, cash buyers purchased 29% of all Southland homes sold in December, down from 29.5% in November but up from 28.4% a year earlier. Cash purchases hit a high of 32.3% of sales last February, while the 10-year monthly average is 14.9%.
This article was republished with permission from TheStreet.