Southland home sales rise on inland surge; median price falls again

La Jolla, CA---Southern California home sales climbed above year-ago levels for the seventh consecutive month in January as bargain-hungry buyers flocked to inland areas pounded by foreclosures and deep discounts. Increased affordability in some of those neighborhoods spurred record or near-record resale activity, while many pricier coastal towns again posted some of their slowest sales in two decades.

Foreclosures continued to play a leading role in the market, accounting for nearly 60 percent of all homes that resold, according to San Diego-based MDA DataQuick, a real estate information service. Sales of newly built homes were the lowest for a January in at least 21 years - partially a reflection of how difficult it is for builders to compete with discounted foreclosures in the inland growth areas.

A total of 15,227 new and resale houses and condos closed escrow in the six-county Southland last month. That was down 23.6 percent from 19,926 in December but up 52.5 percent from 9,983 in January 2008. A decline of 20 to 30 percent between December and January is normal.

Last month's sales were the highest for that month since January 2006, when 21,895 sold, and were 16 percent below the average January sales total since 1988, when DataQuick's statistics begin.

Sales of existing single-family houses reached record levels for a January in inland communities such as Chula Vista and Lemon Grove in San Diego County; Fontana and Victorville in San Bernardino County; Perris and Temecula in Riverside County; and Palmdale in Los Angeles County. Such areas have seen prices drop, and therefore affordability rise, more than most Southland communities.

Coastal towns that logged record-low or below-average January sales of existing houses included Bel Air, Beverly Hills and Santa Monica in Los Angeles County; Newport Beach and Laguna Beach in Orange County; and Del Mar and Encinitas in San Diego County. Such areas have so far seen relatively small price declines and haven't benefitted from the wave of bargain hunting that's boosted inland sales for months.

"We've heard a lot of talk, regarding the decline in home values, about how 'no one wants to catch a falling knife.' But for months we've seen quite a flurry of sales activity in many inland areas where prices have fallen more in line with local incomes," said John Walsh, DataQuick president.

"We can only assume," he continued, "that many first-time buyers, investors and others buying in these areas have concluded it's not worth trying to time the price bottom perfectly. They're happy to lock in substantial discounts relative to the peak. Whether the inland sales pace holds will hinge on factors such as the health of the job market, the availability and cost of financing, and the new efforts to stem foreclosures and halt price depreciation - efforts that could eventually tame inland bargain hunting."

The median price paid for all homes combined last month was $250,000, down 10.1 percent from $278,000 in December and down a record 39.8 percent from $415,000 in January 2008. Last month's median was the lowest since it was $242,000 in February 2002. January's median was 50.5 percent below the peak $505,000 median reached in spring and summer of 2007.

The median sale price - the point where half of the homes sold for more and half for less - has eroded consistently for 19 months. Its steep decline stems not only from falling home values but from changes in the types of homes selling. Increasingly, sales over the past year have involved foreclosure properties, and a growing share has been in the lower-cost inland areas. At the same time, sales in pricier coastal towns have remained sluggish, in part because of problems associated with the cost and availability of financing for high-end real estate.

So-called jumbo financing, formerly defined as mortgages over $417,000, represented about 40 percent of all purchase loans before the August 2007 credit crunch. Last month just 9.2 percent of Southland purchase loans were for more than $417,000. Conversely, a popular form of financing for first-time buyers, government-insured FHA mortgages, rose to a record 40.4 percent of January home purchase loans.

Last month's foreclosure resales - homes resold in January that had been had been foreclosed on in the prior 12 months - represented 58.3 percent of all resales, up from 56.2 percent in December and 28.6 percent a year ago. At the county level, foreclosure resales ranged from 46.0 percent of January resales in Orange County to 71.2 percent in Riverside County. In Los Angeles foreclosure resales were 51.9 percent of resales; in San Diego 55 percent; San Bernardino 67.3 percent and in Ventura County 49.1 percent.

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.

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,081 last month, down from $1,239 the previous month, and down from $1,940 a year ago. Adjusted for inflation, current payments are 51.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 59.9 percent below the current cycle's peak in June 2006.

Indicators of market distress continue to move in different directions. Foreclosure activity has waned but remains near record levels, while financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable. Non-owner occupied buying has risen slightly and is above-average in some markets, MDA DataQuick reported.