February 13, 2013
La Jolla, CA---Southern California's housing market started 2013 with the highest January home sales in six years as sales to investors and cash buyers hovered near record levels and move-up activity remained relatively brisk. The median price paid for a Southland home dipped slightly from December, as it normally does, but jumped 23.5 percent above the year-ago level, a real estate information service reported.
A total of 16,058 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 20.8 percent from 20,274 sales in December, and up 10.6 percent from 14,523 sales in January 2012, according to San Diego-based DataQuick.
A drop in sales from December to January is normal for the season, and on average sales have fallen 27.8 percent between those two months since 1988, when DataQuick’s statistics begin. Last month’s sales were the highest for the month of January since 18,128 homes sold in January 2007, though they were 8.8 percent below the January average of 17,609 sales. The low for January sales was 9,983 in 2008, while the high was 26,083 in 2004.
The median price paid for a home in the six-county Southland was $321,000 last month, down 0.6 percent from $323,000 in December and up 23.5 percent from $260,000 in January 2012. The December 2012 median was the highest for any month since the median was $330,000 in August 2008. The Southland median has increased year-over-year for ten consecutive months.
“This fledgling housing recovery has momentum. Already, price hikes have caused some to question whether it's sustainable, whether it's a 'bubble.' Let's not forget, though, that we're still climbing out of a deep hole from the housing downturn. Regional home sales remain sub-par and prices in many areas are at least 30 to 40 percent below their peaks. That's not to say we don't see risks. Sharp price gains can attract speculation, which could lead to unsustainable, short-term gains in certain submarkets. A lot of today's housing demand is fueled not by spectacular job growth and soaring consumer confidence, but by super-low mortgage rates and unusually high levels of investor and cash purchases. Take away any one of those elements and it will matter,” said John Walsh, DataQuick president.
“For the overall market, price pressures should gradually ease as more homeowners react to rising values. This is the 'supply response' many analysts expect. The idea is that many who've held out for higher prices will be tempted to stick a for-sale sign in the front yard. Fewer will owe more than their homes are worth, enabling them to sell. Construction is already rising, and we could see lenders clear backlogs of distressed properties faster, adding to the supply.”
Roughly half of the median sale price's ups and downs the last five years has been the result of shifts in the types of homes sold. When looking at one single sub-category, the median price paid for a 3-bedroom, 2-bathroom, 1,250-to-1,450-square-foot house built between 1950 and 1985 was $315,000 last month, up 1.9 percent from $309,000 in December, and up 13.7 percent from $277,000 a year ago.
The move-up market continued to post sizeable sales gains last month. January sales between $300,000 and $800,000 – a range that would include many first-time move-up buyers – shot up 49.6 percent year-over-year. Sales over $500,000 jumped 74.0 percent from one year earlier, while sales over $800,000 rose 84.2 percent compared with January 2012.
Last month 24.7 percent of all Southland home sales were for $500,000 or more, compared with 26.1 percent in December (the highest level since July 2008), and 16.4 percent in January 2012.
Sales continued to fall on a year-over-year basis in many lower-cost communities. The number of homes that sold below $200,000 fell 23.5 percent year-over-year, while sales below $300,000 dipped 12.2 percent. Sales in many affordable markets have been limited by the lack of inventory, caused largely by the slowdown in foreclosures and the relatively high percentage of owners who can’t afford to move because they owe more than their homes are worth.
Last month foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 15.0 percent of the Southland resale market. That was up slightly from 14.2 percent the month before and down from 32.6 percent a year earlier. In recent months foreclosure resales have been at the lowest level since September 2007. In the current cycle, foreclosure resales 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 25.9 percent of Southland resales last month. That was down from an estimated 26.5 percent the month before and 27.2 percent a year earlier.
Once again investor and cash buying was at or near record levels.
Absentee buyers – mostly investors and some second-home purchasers – bought a record 30.7 percent of the Southland homes sold in January. That was up from a revised 30.4 percent the prior month and 28.0 percent a year earlier. The monthly average since 2000 is 17.8 percent. Last month’s absentee buyers paid a median $260,000, up 33.3 percent from a year earlier.
Buyers paying with cash accounted for 34.9 percent of last month's home sales, compared with a record 35.7 percent the month before and 32.2 percent a year earlier. Since 1988 the monthly average is 15.8 percent. Cash buyers paid a median $268,000 last month, up 34.0 percent from a year ago.
Meantime, credit conditions appeared to have changed little.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 21.6 percent of last month’s Southland purchase lending, down from 22.8 percent the prior month and up from 13.6 percent a year earlier. The December 2012 figure was the highest for any month since September 2007, when jumbos made up 26.9 percent of the purchase loan market. In the months leading up to the credit crunch that struck in August 2007, jumbos made up close to 40 percent of the market.
With fixed rates on 30-year loans so low, and aversion to risk in the marketplace high, the use of adjustable-rate mortgages (ARMs) remains very low in an historical context. Last month 5.8 percent of Southland home purchase loans were ARMs, compared with 6.2 percent the prior month and 6.0 percent a year earlier. Since 2000, a monthly average of about 33 percent of Southland purchase loans were ARMs.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 23.5 percent of all purchase mortgages last month. That was up from 23.2 percent the month before and down from 31.1 percent a year earlier. In recent months the FHA share has been the lowest since summer 2008. The decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers are having competing with investors in the housing market.
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 $1,140, up a hair from a revised $1,139 the month before and up from $983 a year earlier. Adjusted for inflation, last month’s typical payment was 51.6 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 60.3 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity, while above long-term averages, continues to drop and is far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
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Source: DQNews.com Media calls: Andrew LePage (916) 456-7157
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