A short-lived real estate rally in California’s Bay Area has come to an end in October, according to the latest numbers from DataQuick. Luxury home sales tapered off, with local agents blaming the new “conforming loan” limits that make it harder and more expensive for buyers to get big loans. Distressed property sales, short sales and foreclosure resales are back in play, while buyers using jumbo and ARM loans eased out of the market for the month. Cash buyers and absentee buyers, who are assumed to have purchased property for investment purposes, accounted for a larger share of sales from the previous month. For more on this continue reading the following article from TheStreet.
The Bay Area housing market logged another month of lackluster activity in October as some of the recent signs of incremental market improvement began to fade.
High-end sales dropped markedly, likely the result of changes to "conforming loan" limits, a real estate information service reported.
A total of 6,444 new and resale houses and condos sold in the nine-county Bay Area last month. That was down 4.5% from 6,749 in September, and up 5.3% from 6,122 in October 2010, according to San Diego-based DataQuick.
Bay Area sales are usually flat from September to October. October sales have varied from 5,486 in 2007 to 13,392 in 2003. The average since 1988, when DataQuick’s statistics begin, is 8,620.
"We’ve been watching the real estate market take itty bitty baby steps in the direction of normalcy, but that trend paused last month. ARM and jumbo loan usage went back down, cash and investor sales went back up as a portion of the market. This may well be a short-term pause while the market recalibrates changes in loan thresholds. We’ll know more in a few months," said John Walsh, DataQuick president.
The conforming loan limit was reduced Oct. 1 from $729,750 to $625,500 for most Bay Area counties. In Solano County it went from $557,500 to $400,200; in Sonoma County from $662,500 to $520,950.
The median price paid for all new and resale houses and condos sold in the Bay Area last month was $350,000. That was down 4.1% from $365,000 in September, and down 8.6% from $383,000 in October 2010. Last month’s median was the lowest since last February when it was $337,250.
Last month distressed property sales — the combination of foreclosure resales and "short sales" — made up about 45.4% of the resale market. That was the same as in September and down slightly from 46.5% a year ago.
Foreclosure resales — homes that had been foreclosed on in the prior 12 months — accounted for 25.3% of resales in October. That was down from a revised 25.4% in September, and down from 28.6% 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 20.1% of Bay Area resales last month. That was up a hair from an estimated 20.0% in September and up from 17.9% a year earlier. Two years ago the estimate was 17%.
Last month 30.3% of Bay Area sales were for $500,000 or more, down from 34.2% in September, and down from 37.2% in October 2010. The 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 47.5% of homes sold for $500,000-plus.
The number of homes that sold for $500,000 or more last month fell 20.0% from October 2010, while the number of homes sold under $500,000 rose 8.8% year-over-year and sales below $300,000 increased 9.6%.
Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 21.7% of all Bay Area home purchase mortgages in October, the same as in September and down from 25.1% a year earlier.
One indicator of mortgage availability that had seen improvement this year dropped again in October, when 12.7% of the Bay Area’s home purchase loans were adjustable-rate mortgages (ARMs), down from 12.8% in September, and up from 9.1% in October last year. The high point for the share of purchase loans that were ARMs was 16.8% in June this year. Over the last decade, ARMs have accounted for 51.1% of all purchase loans. ARMs hit a low of 3% of all Bay Area purchase loans in January 2009.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 29.5% of last month’s purchase lending, down from a revised 32.1% in September, and down from 34% a year ago. Jumbo usage dropped to 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 22.4% of all Bay Area homes sold, up from 21.9% in September and 19.1% a year ago. The peak was 23.4% in February this year, while the monthly average since 2000 is 13.9%. Absentee buyers paid a median $240,681 in October, down from $250,000 in September and down from $245,000 a year ago.
Buyers who appear to have paid all cash — meaning no corresponding purchase loan was found in the public record — accounted for 28.7% of sales in October, up from 27.5% in September, and up from 24.2% a year ago. The record was 30.5% last February, while the monthly average going back to 1988 is 11.8%. Cash buyers paid a median $240,000 in October, down from $245,000 in September but up from $239,000 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 $1,348, down from $1,413 in September, and down from $1,504 a year ago. Adjusted for inflation, last month’s payment was 51.3% below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 64.% below the current cycle’s peak in July 2007.
This article was republished with permission from TheStreet.