Real estate sales in San Francisco reached a one-year high in June, driven by a combination of factors that pushed turnover to 14.5% over May sales. Analysts note a larger demand in lower-priced properties (below $300,000) in the nine-county area, lower interest rates, lower prices and a glut of distressed properties in the market as reasons for the sharp gain. Foreclosures and short sales draw down the value of new homes, making all more appealing to local buyer as well as absentee investors. The area also boasts many buyers in industries that have not been hit as hard during the economic crisis, like high-tech, which observers may feel contributed an additional boost. For more on this continue reading the following article from The Street.
Home sales in the San Francisco Bay area rose sharply last month from May to the highest level for any month since June 2010, when outgoing homebuyer tax credits gave housing demand a final boost. The median price rose slightly from May but remained below the year-ago level for the ninth consecutive month amid a sluggish move-up market and a higher share of sub-$300,000 transactions, a real estate information service reported.
A total of 7,998 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 14.5% from 6,988 in May but down 4.5% from 8,373 in June 2010, according to San Diego-based DataQuick. .
On average, Bay Area sales have risen 4.9% between May and June since 1988, when DataQuick’s statistics begin.
Last month’s sales were the lowest for the month of June since 2008, when 7,178 homes sold. June sales have ranged from a low of 7,118 in 1993 to a high of 15,735 in 2004, while the average is 10,129. Sales last month fell 21.0% below the June average. June is normally a strong month and, among all months, it’s had the highest number of sales most often – seven of the past 23 years.
In June last year – the peak month for 2010 – sales were bolstered by state and federal efforts to stimulate the housing market via homebuyer tax credits. Those credits had expired or been largely depleted by July 2010, when sales plunged 19% from the month before and 23% from the previous July.
While the 14.5% jump in sales last month from May was nearly triple the normal increase, higher May-to-June gains were recorded as recently as 2008 and 2009, which logged 15.5% and 16.1% gains, respectively.
"It’s difficult to point to one specific thing that caused last month’s sales to jump more than usual from May. It wasn’t just in the Bay Area – we saw it across much of the state. June likely benefitted from a combination of factors, such as price reductions, low mortgage rates and perhaps a batch of short sale transactions from spring that took months to close. Bargain hunters, mainly investors and first-time buyers, remain very active," said John Walsh, DataQuick president.
"While overall consumer confidence remains low, folks in certain industries such as high-tech are feeling more confident," he continued. "Let’s keep in mind, however, that last month was not a particularly strong June, historically speaking, and one month’s increase in sales from the prior month doesn’t constitute a trend."
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The median price paid for all new and resale houses and condos sold in the Bay Area last month was $377,750, up 1.5% from May but down 7.9% from $410,000 in June 2010. Last month’s median was the highest since it was $380,000 last November.
Last month’s median was 30.3% higher than the low point for the current real estate cycle – $290,000 in March 2009. However, the June median was 43.2% below the peak $665,000 median reached in June/July 2007. Around half of the median’s peak-to-trough drop was the result of a decline in home values, while the other half reflects a shift in the sales mix toward lower-cost homes, especially inland foreclosures.
Today’s median is suppressed somewhat by abnormally low sales of newly built homes, which typically sell for more than resale homes, and abnormally high levels of foreclosure resales, which are among the most aggressively priced.
Last month 399 newly built houses and condos sold in the Bay Area, down 43.8% from a year earlier and the second-lowest for a June in DataQuick’s records, behind 360 new-home sales in 1993.
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 26.2% of resales in June. Last month’s figure was down slightly from 26.5% in May and up from 25.6% a year ago. Foreclosure resales peaked at 52.0% in February 2009. The monthly average for foreclosure resales over the past 15 years is about 9%.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 18.3% of Bay Area resales last month. That compares with an estimated 18.2% in May, 18.9% a year earlier, and 14.0% two years ago.
Last month 37.0% of Bay Area sales were for $500,000 or more, up from 36.3% in May but down from 40.7% in June 2010. The all-time low for the current cycle was January 2009, when just 22.7% of sales crossed the $500,000 threshold. Over the past 10 years, a monthly average of 47.2% of homes sold for $500,000-plus.
However, an alternative method of tracking activity in higher-end areas suggests that those neighborhoods now account for a fairly normal level of sales relative to overall regional activity.
Sales in zip codes representing the top one-third of the market, based on historical prices, accounted for 38.4% of all sales in June. That was up from 37.7% in May and 37.0% a year ago. The 10-year monthly average is about 36%. Those higher-end areas’ contribution to regional sales had dropped to as low as just 18.0% in January 2009, while their peak market share was 44.7% of sales in July 2007.
When viewed by several major price segments, it’s clear that the middle of the Bay Area market, roughly defined as $400,000 to $800,000, has taken the biggest hit over the past year. Sales in that price range accounted for 30.0% of all transactions last month, down from 30.9% in May and 37.6% a year ago, when homebuyer tax credits helped spur more move-up activity in that price range. Last month sales below $300,000 made up 38.9% of all transactions, up from 37.9 in May and 30.9% a year ago. Sales above $800,000 represented 17.0% of last month’s sales, up from 16.5% in May and 15.8% a year earlier.
Fueling many lower-end transactions are low-down-payment, government-insured FHA home purchase loans, a popular choice among first-time buyers. They accounted for 20.8% of all Bay Area home purchase mortgages in June, down from 21.3% in May and 24.7% a year earlier.
While sales of higher-cost homes continue to suffer from the credit crunch that struck in August 2007, one indicator of mortgage availability continued to improve slightly. In June, 17.3% of the Bay Area’s home purchase loans were adjustable-rate mortgages, the highest portion since 20.7% in August 2008. June’s figure was up from 16.1% in May and 12.2% a year earlier. ARMs are nothing unusual in the Bay Area, where the average monthly ARM rate over the last 10 years is 46%. ARMs hit a low of 3.0% in January 2009.
Jumbo loans, mortgages above the old conforming limit of $417,000, remain relatively hard to get but accounted for 35.2% of last month’s purchase lending, up from 32.6% in May and 34.5% a year ago. The post-housing-boom low was 17.1% in January 2009. Before the credit crunch struck in August 2007, jumbos accounted for nearly 60% of the Bay Area purchase loan market.
Last month absentee buyers – mostly investors – purchased 21.7% of all Bay Area homes sold, up from 21.3% in May and 16.3% a year ago. The peak was 23.4% in February this year, while the monthly average since 2000 is 13.7%. Absentee buyers paid a median $226,500 in June, down from $245,000 in May and $280,000 a year ago.
Buyers who appeared to have paid all cash – meaning no corresponding purchase loan was found in the public record – accounted for 25.4% of sales in June, down from 27.4% in May and up from 21.6% a year ago. The record was 30.5% this February, while the monthly average is 11.8% since 1988. Cash buyers paid a median $235,000 in June, down from $250,000 in May and $281,750 a year earlier.
San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Because of late data availability, sales were estimated in Alameda and San Mateo counties.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $1,533, the same as in May and down 10.3% from $1,709 a year ago. Adjusted for inflation, last month’s payment was 44.5% below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 59.0% 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 below peak levels reached over the last three years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above average, DataQuick reported.
This article was republished with permission from The Street.