Strong interest from investors and cash buyers combined with dropping prices contributed to a spike in home sales in Southern California for the month of February. DataQuick reports Southland sales reached their highest in five years for the month, up 7.2% from January and 8.4% from the previous year. The rise in sales occurred largely in the sub-$300,000 market, while sales above that mark dipped more as the prices increased. Sales of distressed homes including foreclosures and short sales continue to make up the majority of sales as access to credit remained tight. For more on this continue reading the following article from TheStreet.
The Southland housing market posted the highest number of February home sales in five years as record levels of investor and cash buyers helped spur robust activity under $300,000.
The median price paid for homes across the six-county region inched up from January but dropped below the year-earlier level for the twelfth consecutive month, a real estate information service reported.
A total of 15,573 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 7.2% from 14,523 in January, and up 8.4% from 14,369 in February 2011, according to San Diego-based DataQuick.
The increase in sales between January and February was larger than usual. On average, sales have risen 1.1% between those two months since 1988, when DataQuick’s statistics begin. Southland sales have increased year-over-year for two consecutive months and for six out of the last seven months. However, last month’s sales tally was 12.3% below the average for all the months of February since 1988.
Sales did not rise across the price spectrum last month. Transactions below $300,000 rose 9.5% from a year earlier, while the number of $300,000 to $800,000 deals dipped 0.8% year over year and sales above $800,000 fell 12.6%.
"February sales got a big boost from investors and others paying cash for relatively affordable homes, as well as from an extra day’s worth of sales thanks to the leap year. Without the latter, sales might have been up a bit, but not to a five-year high. It’s just one more reason for us to remind everyone that January and February usually aren’t good months to use for forecasting purposes. The big picture remains one where the bottom of the housing market continues to see much of the action, while move-up activity remains sluggish. Financing is still difficult for many and lots of potential move-up buyers and sellers are stuck because they owe more than their homes are worth," said John Walsh, DataQuick president.
The median price paid for a Southland home last month was $264,750, up 1.8% from $260,000 in January but down 3.7% from $275,000 in February 2011.
Distressed sales continued to make up more than half of the resale market.
Foreclosure resales — properties foreclosed on in the prior 12 months — accounted for 32.5% of the resale market last month, down from a revised 32.6% in January and down from 37% a year earlier. Foreclosure resales hit a high for the current cycle of 56.7% in February 2009 and a low of 31.6% last November.
Short sales — transactions where the sale price fell short of what was owed on the property — made up an estimated 20.5% of Southland resales last month. That compares with 21.1 % in January, which was a high point for the current real estate cycle, and 19.7% in February 2011.
Credit conditions remained tight. Adjustable-rate mortgages (ARMs) accounted for 5.7% of last month’s Southland home purchase loans, down from 6% in January and 7.7% a year ago. Since 2000, a monthly average of about 37% of purchase loans were ARMs.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 14.4% of last month’s purchase lending, down from 15.2% in January and down from 15.6% a year earlier. In the months leading up to the credit crisis that struck in August 2007, jumbos accounted for 40% of the market.
Absentee buyers — mostly investors and some second-home purchasers — bought a record 29.7% of the Southland homes sold in February, up from a revised 28% in January and 26.4% a year earlier.
Cash purchasers accounted for a record 32.8% of February home sales, up from 32.2% in January and up from 32.3% a year earlier. Cash buyers paid a median $200,000 last month, the same as in January and down from $205,000 a year earlier. Since 2000, the monthly average for Southland homes purchased with cash is 15.2%.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 31.2% of all purchase mortgages in February. Last month’s FHA level was up from 31.1% in January and down from 32.2% a year earlier. Two years ago FHA loans made up 36.8 % of the purchase loan market, while three years ago it was 36.9 %.
This article was republished with permission from TheStreet.