July 17, 2012La Jolla, CA---The number of homes sold in Southern California rose above a year earlier for the sixth month in a row in June, the result of robust investor demand and significant sales gains for mid- to high-end homes. The continuing pattern of fewer foreclosures re-selling and more activity in pricier coastal counties helped the region’s median sale price climb to a two-year high, a real estate information service reported.
The median price paid for a home in the six-county Southland rose last month to $300,000, up 1.7 percent from $295,000 in May and up 5.3 percent from $285,000 in June 2011, according to San Diego-based DataQuick.
Last month’s median was the highest since the median was also $300,000 in June 2010, when the market got a final big boost from expiring homebuyer tax credits. The median has risen month-to-month for five consecutive months and has increased year-over-year for the past three. The June median’s 5.3 percent year-over-year gain followed increases of 5.4 percent and 3.6 percent in May and April, respectively. Before then, the median had fallen year-over-year for 13 straight months.
The June median was 40.6 percent lower than the Southland’s $505,000 peak median in mid 2007, and it was 21.5 percent higher than the region’s low point for the current real estate cycle – $247,000 in April 2009.
Higher demand and a smaller inventory of homes for sale have put pressure on prices in some areas, but two other trends are at work: First, there’s been a significant drop in the share of transactions that are foreclosed properties, which tend to sell at a discount and be concentrated in lower-cost areas. Second, a greater portion of sales are occurring in the higher-cost coastal markets. Last month, for example, sales in San Diego, Orange, Los Angeles and Ventura counties represented 71 percent of all Southland activity, up from 68 percent in June 2011.
“The June numbers look pretty good at first glance, but they're more mixed when you scratch beneath the surface. Yes, the median sale price rose again. But it’s clear this has a lot to do with changes in the types of homes selling, rather than across-the-board price appreciation. Fewer of the homes selling now are foreclosures, while more are nice houses in mid- to higher-end neighborhoods. June sales were stronger than a year earlier, but they were also around 20 percent below average for that month,” said John Walsh, DataQuick president.
“Super-low mortgage rates and lower home prices have attracted many buyers and helped compensate for the economy’s lackluster performance, and for not-so-great consumer confidence,” he said. “With inventory and foreclosure resales dwindling, more housing markets appear to be entering an early recovery phase. But in some cases we consider their status to be fairly precarious. What happens next will hinge largely on the strength of the economy and the decisions lenders make regarding scores of distressed properties that continue to hang over the market.”
In June, a total of 22,075 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was down 0.5 percent from 22,192 in May, and up 7.5 percent from 20,532 in June 2011.
Home sales typically rise between May and June, with that increase averaging 6.8 percent since 1988, when DataQuick’s statistics begin. However, the drop in sales between May and June is the result of May having 22 business days on which sales could close, compared with 21 days in June. The average number of homes to close escrow daily in June was 4.2 percent higher than the May average.
On a year-over-year basis, Southland home sales have increased for six consecutive months. Sales have also increased year-over-year in ten out of the last 11 months. Still, last month’s sales were 19.9 percent lower than the average sales tally of 27,544 for all the months of June since 1988. The low for June sales was 18,032 in June 2008, while the high was 40,156 in June 2005.
While overall Southland sales rose 7.5 percent last month from a year earlier, stronger sales gains were recorded in price segments above $250,000. The volume of transactions in lower-cost markets has been restrained by, among other things, declining inventories of homes for sale, especially foreclosures.
The number of Southern California homes sold in June for less than $200,000 fell 3.0 percent from a year earlier, while the number that sold for $200,000 to $400,000 increased 21.6 percent. Sales between $300,000 and $800,000 – a range that would include many move-up buyers – increased 12.8 percent year-over-year. Sales over $800,000 rose 7.1 percent from June 2011.
Last month 22.5 percent of all Southland sales were for $500,000 or more, up from 21.8 percent in May and 21.6 percent a year earlier. June’s share of sales above $500,000 was the highest since August 2008, when they made up 23.6 percent of the market. The low point for $500,000-plus sales was in January 2009, when only 13.8 percent of sales crossed that threshold. Over the past decade, a monthly average of about 28 percent of homes sold for $500,000 or more.
Distressed sales – the combination of foreclosure resales and short sales – made up 42.2 percent of last month’s resale market. That was the lowest level since the figure was 41.4 percent in February 2008.
Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 24.5 percent of the Southland resale market last month, down from a revised 26.9 percent the month before and 32.9 percent a year earlier. Last month’s figure was the lowest since foreclosure resales were 24.3 percent of the resale market in December 2007. In the current cycle, the figure hit a high of 56.7 percent in February 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.7 percent of Southland resales last month. That was down slightly from an estimated 18.0 percent the month before and 17.9 percent a year earlier.
Credit remained relatively tight last month but the share of purchase loans in the “jumbo” category edged up again, reaching its highest point since late 2007.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 20.0 percent of last month’s purchase lending – the highest since December 2007, when it was 21.7 percent. June’s figure was up from 18.9 percent the prior month and 18.2 percent a year ago. In the months leading up to the credit crisis that hit in August 2007, jumbos made up about 40 percent of the market.
The use of adjustable-rate mortgages (ARMs) hardly budged last month. ARMs made up 6.7 percent of home purchase loans in June, compared with 6.6 percent in May and 8.8 percent a year earlier. Since 2000, a monthly average of about 34 percent of purchase loans were ARMs.
Investor and cash-only purchases continued to hover near record levels.
Absentee buyers – mostly investors and some second-home purchasers – bought 27.0 percent of the Southland homes sold last month. That was down from 27.5 percent the prior month and up from 24.1 percent a year earlier. The record was 29.9 percent in February this year, while the monthly average since 2000 is 17.3 percent. Last month’s absentee buyers paid a median $225,000, the same as the month before and up from $212,000 a year earlier. The median paid by absentee buyers last month was 25.0 percent lower than the $300,000 median paid for all homes sold.
Buyers paying with cash accounted for 31.6 percent of June home sales, down from 32.1 percent the month before and up from 28.6 percent a year earlier. Cash purchases peaked at 33.7 percent of all sales this February, and since 2000 the monthly average is 14.8 percent. Cash buyers paid a median $235,000 last month, up from $234,500 the prior month and $215,000 a year ago. The median price paid by cash buyers was about 22 percent lower than the median paid for all homes sold last month.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 27.8 percent of all purchase mortgages last month. June’s FHA level was down from 29.4 percent the month before and 31.1 percent a year earlier. Last month’s FHA share was the lowest since August 2008, when it was 26.8 percent.
DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,102, compared with $1,100 the month before and $1,157 a year earlier. Adjusted for inflation, last month’s typical payment was 53.1 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 61.6 percent 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 much lower than peak levels reached in recent years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
For the county-level sales chart, see DQNews.com.
Source: DQNews.com Media calls: Andrew LePage (916) 456-7157
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