A potential rebound in Southland residential real estate seems to have stalled on the lowest April sales in the last three years. Less than 20,000 home sales were made in the area’s six most populated counties the entire month, including large markets like Los Angeles and San Diego. More than half of those were foreclosure sales or short sales, and many buyers were absentee investors. Analysts place the blame on job growth and fear of further home price reductions. For more on this continue reading the following article from The Street.
The prospect of a near-term resurgence in Southern California’s housing market continued to wither last month as home sales fell to the lowest level for an April in three years. Prices trended sideways or down slightly, depending on location, as credit remained tight and distress sales and investor activity continued to dominate the market, a real estate information service reported.
A total of 18,344 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in April. That was down 5.5% from 19,412 in March, and down 9.2% from 20,205 in April 2010, according to San Diego-based DataQuick. April marked the 10th consecutive month in which Southland sales fell year-over-year.
On average, sales between March and April have increased 0.9% since 1988, when DataQuick’s statistics begin. April sales have varied from a low of 15,303 in 1995 to a high of 37,905 in 2004. Last month’s sales count was 25.4% below the average April sales tally of 24,606. The last time April sales were lower was in April 2008, when 15,615 homes sold.
The 1,024 sales of newly built homes last month marked a 1.9% gain from a year earlier, but it was still the Southland’s second-slowest April for new-home sales since at least 1988.
The median price paid for all new and resale Southland houses and condos purchased last month was $280,000, down 0.2% from $280,500 in March, and down 1.8% from $285,000 in April 2010. The median has declined year-over-year for two consecutive months, and hasn’t posted an annual increase since last December, when it rose 0.3% from a year earlier.
The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially inland foreclosures.
"The market’s in a rut at a time it would normally be building momentum. Two of the more likely forces that could get it going again are more robust job growth and home price reductions. At the moment, the latter appears to be the more likely short-term catalyst," said John Walsh, DataQuick president.
"Sales have been far below average for quite a while and there’s little doubt there’s pent-up demand out there. But too many people still aren’t in the mood or in a position to buy. They might be concerned about prices falling more, or can’t qualify for a loan. They might owe more on their homes than they’re worth and can’t move up. Others were foreclosed on in recent years and can’t re-enter the market yet."
Although the market is still characterized by historically high levels of distressed property sales, investor purchases and tight credit, some indicators have been inching their way back toward normalcy.
Last month adjustable-rate mortgages (ARMs) accounted for 8.2% of all Southland purchase loans, up from 7.9% in March and 5.8% a year ago. While still at a low level, last month’s ARM usage was the highest since 10.3% in August 2008. Historically, ARMs are nothing unusual: Over the past 10 years, a monthly average of about 38% of purchase loans were ARMs.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.3% of last month’s purchase lending, up from 16.2% in March and 16.1% a year earlier. In the months leading up to the credit crisis that struck in August 2007, jumbos accounted for 40% of the market.
Although distressed property sales eased slightly last month, they still accounted for more than half of the resale market.
Foreclosure resales – properties foreclosed on in the prior 12 months – made up 33.9% of all Southland resales in April, down from 36.0% in March and 36.4% a year ago. Foreclosure resales hit a high of 56.7% in February 2009 and a low of 32.8% last June.
Short sales – transactions where the sale price fell short of what had been owed on the property – made up an estimated 17.8% of Southland resales last month. That was down from an estimated 18.3% in March and 18.1% a year earlier, but up from 12.2% two years ago.
Absentee buyers – mostly investors and some second-home purchasers – bought 25.4% of the Southland homes sold in April, paying a median $207,000. Absentee buyers made up 26.2% of sales in March and 22.9% in April 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 16.4% of homes.
Buyers paying cash accounted for 31.2% of April home sales, paying a median $215,000. Last month’s cash buyer level was the same as in March but up from 28.6% a year ago. Cash purchases hit a high of 32.3% of all sales this February, while the 10-year monthly average is 13.5%. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.
Last month 19.9% of all sales were for $500,000 or more, down from a revised 20.3% in March and down a hair from 20.0% a year earlier. The low point for $500,000-plus sales was in January 2009, when only 13.8% of sales were above that threshold. Over the past 10 years, a monthly average of 27.1% of homes sold for $500,000 or more.
But 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. Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 37.0% of total sales last month – exactly the 10-year monthly average. Last month’s figure was up from 36.7% in March and up from 34.9% a year ago. These higher-cost zips codes’ contribution to overall sales hit a low of 26.2% in January 2009.
Last month the%age of Southland homes bought and re-sold on the open market within a six-month period rose slightly to 3.3%, up from a 3.2% "flipping" rate in March but down from 3.4% a year ago. Flipping varied last month from as little as 2.5% in Ventura County to as much as 3.9% in Los Angeles County.
DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick recently announced that, as a result of TPG Capital’s purchase of DataQuick, MDA Lending Solutions and MDA MindBox in January, the three companies would integrate operations effective May 2 and operate under the name DataQuick.
The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,189 last month, up from $1,185 in March and down from $1,238 in April 2010. Adjusted for inflation, current payments are 48.3% below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 57.7% 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 two years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
This article was republished with permission from The Street.