Bay Area Real Estate Showing Improvement But Lending Still Sluggish

Bay Area real estate sales in December 2009 were up from the same period in 2008. While foreclosure resales remained a significant portion of the total transactions, the …

Bay Area real estate sales in December 2009 were up from the same period in 2008. While foreclosure resales remained a significant portion of the total transactions, the percentage of residential home sales that were foreclosure resales decreased significantly from December 2008. For more on this, see the following article from DQNews.

The Bay Area housing market last month continued its step-by-step climb up from the bottom with upticks in sales as well as prices. Many of the underlying trends are shifting slowly, if at all, indicating sluggish change in market fundamentals, a real estate information service reported.

A total of 7,828 new and resale houses and condos were sold in the nine-county region last month. That was up 13.8 percent from 6,878 in November, and up 13.6 percent from 6,889 for December 2008, according to MDA DataQuick of San Diego.

An increase from November to December is normal for the season. Last month’s year-over-year increase was the 16th in a row. The sales count was the highest for a December since 8,372 homes were sold in December 2006. Sales for Decembers since 1988 have ranged from 5,065 in 2007 to 12,349 in 2003, while the average is 8,762.

“A couple of years from now, when looking back, there’s a good chance we’ll refer to the beginning of 2009 as the bottom of the market. But that doesn’t mean we’re anywhere near normal yet. Sales distribution is still lopsided towards lower-cost homes, driven by tax incentives and distress activity. Whole mortgage categories don’t exist for buyers. Putting a deal together is excruciating, like swimming in molasses. We don’t expect much genuine improvement until lending institutions re-open their spigots,” said John Walsh, MDA DataQuick president.

The median price paid for a Bay Area home was $380,000 in December. That was down 1.8 percent from $387,000 for the month before, and up 15.2 percent from $330,000 for December 2008. Last month was the third in a row with a year-over-year gain, after 22 months of decline. The median hit bottom at $290,000 last March, well off the $665,000 peak reached in June and July of 2007.

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Foreclosure resales – homes sold in December that had been foreclosed on in the prior 12 months – made up 32.3 percent of all resale activity. That was up from a revised 31.9 percent in November, and down from 48.3 percent in December 2008. Foreclosure resales peaked at 52 percent of resales in February 2009.

Federally-insured FHA loans, a popular choice among first-time buyers, made up 25.6 percent of all Bay Area purchase loans last month. That was up from 25.1 percent in November, 22.8 percent a year ago and less than 0.5 percent two years ago.

Home loans for more than $417,000, the old “jumbo” limit, used to account for more than 60 percent of the Bay Area’s purchase financing. Last month it was 29.8 percent. That percentage rose from 17.1 in January 2009 to 28.7 last June. It has since remained at roughly 30 percent.

From the beginning of 2000 until August 2007, 61 percent of the Bay Area’s home purchase loans were adjustable-rate mortgages (ARMs). Last month it was 8 percent, up from 7.9 percent the month before, and up from 5.1 percent in December 2008.

The increased availability of jumbo loans and ARMs is considered essential to a continued normalization of the Bay Area housing market.

The most active lenders to Bay Area home buyers last month were Wells Fargo and Bank of America.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA 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.

Last month absentee buyers purchased 17.9 percent of all Bay Area homes sold, while buyers who appeared to have paid all cash – meaning there was no corresponding purchase loan – accounted for 22.7 percent of sales.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $1,619 last month, down from $1,639 the previous month, and up from $1,471 a year ago. Adjusted for inflation, current payments are 38.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 54.5 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity is off its recent peak but remains high by historical standards. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average in some markets, MDA DataQuick reported.

This article has been republished from DQNews. You can also view this article at DQNews, a real estate research and news site.


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