Southern California home sales held at a seven-year high last month thanks to a stronger economy, pent-up demand, low mortgage rates and the widening perception that a home is a good investment. Prices continued to regain lost territory as buyers competed for a thin supply of homes for sale and poured a record amount of cash into the housing market, a real estate information service reported.
A total of 23,034 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 7.6 percent from 21,415 sales in April, and up 3.8 percent from 22,192 sales in May 2012, according to San Diego-based DataQuick.
Last month’s sales were the highest for the month of May since 30,303 Southland homes sold in May 2006, but they were still 10.1 percent below the May average of 25,617 sales since 1988, when DataQuick’s statistics begin. Over the last seven years Southland home sales have been below average for any particular month.
The median price paid for all new and resale houses and condos sold in the six-county Southland was $368,000 last month, up 3.1 percent from $357,000 in April and up 24.7 percent from $295,000 in May 2012. Last month’s median was the highest for any month since May 2008, when it was $370,000, and the year-over-year increase was the highest since the median rose 24.8 percent in October 2004.
The median has risen on a year-over-year basis for 14 consecutive months, with those annual gains ranging between 10.8 percent and 24.7 percent over the past 10 months. May’s median remained 27.1 percent below the peak $505,000 median in spring/summer 2007. The median fell $256,000 from that peak to its $249,000 trough in April 2009, and it is currently on pace to regain half of that peak-to-trough loss sometime this summer.
In a sign of widespread market confidence, Southern California home buyers are putting a record amount of their own skin in the real estate game. In May they paid a total of $4.65 billion out of their own pockets in the form of down payments or cash purchases, an all-time high. That was up from $4.57 billion in April, and up from $3.89 billion a year ago.
“We’re deep into uncharted territory: Amazingly low mortgage rates, a razor-thin inventory of homes for sale, and the release of years’ worth of pent-up demand. Plus there’s a seemingly endless stream of investors and non-investors who pay cash and thereby avoid the loan-qualification process. How this all plays out is educated guesswork at this point. Understandably, speculation continues over whether another housing bubble is forming,” said John Walsh, DataQuick president.
“History suggests that’s a tough call early on. What seems obvious is that if prices keep rising fast they’ll cause many more people to list their homes for sale, and that increase in supply should at least slow the rate of price appreciation,” he said.
It appears that most of last month’s 24.7 percent year-over-year gain in the Southland median sale price reflects rising home prices, while perhaps a quarter of it reflects a change in market mix.
In May, the lowest-cost third of the region’s housing stock saw a 23.4 percent year-over-year rise in the median price paid per square foot for resale houses. The annual gain was 19.2 percent for the middle third of the market and 16.8 percent for the top, most-expensive third.
Sales in the middle and upper price ranges continued to soar last month compared with a year ago, while activity fell sharply again in many affordable markets.
Home sales rose 30.3 percent year-over-year in the $300,000 to $800,000 price segment – a range that would include many move-up buyers. The number sold for $500,000 or more jumped 46.7 percent from one year earlier, while $800,000-plus sales increased 46.7 percent year-over-year.
In May, 31.3 percent of all Southland home sales were $500,000-plus – the highest level for any month since February 2008, when 34.2 percent of sales crossed the $500,000 threshold. Last month’s $500,000-plus level was up from 30.5 percent of sales in April and 21.9 percent a year earlier.
Last month the number of Southland homes sold below $200,000 dropped 35.1 percent year-over-year, while sales below $300,000 fell 27.1 percent.
The declines aren’t the result of weak demand. The main problem has been inadequate supply, given many owners can’t afford to sell their homes because they still owe more than they are worth, and because lenders aren’t foreclosing on as many properties.
Last month foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 10.8 percent of the Southland resale market. That was down from 12.4 percent the month before and down from 26.9 percent a year earlier. Last month’s foreclosure resale rate was the lowest since it was 10.0 percent in August 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 17.7 percent of Southland resales last month. That was the same as the month before and down from 24.3 percent a year earlier.
Absentee buyers – mostly investors and some second-home purchasers – bought 29.5 percent of the Southland homes sold last month. That was down from 30.6 percent in April and up from 27.5 percent a year earlier. The record was 32.4 percent in January this year, while the monthly average since 2000, when the absentee data begin, is 18.1 percent. Last month’s absentee buyers paid a median $292,000, up 29.8 percent from a year earlier.
After hitting a peak earlier this year, the share of homes flipped has edged slightly lower but remains higher than last year. In May, 5.9 percent of all Southland homes sold on the open market had previously sold in the prior six months, down from a flipping rate of 6.0 percent in April and up from 4.3 percent a year ago. (The figures exclude homes resold after being purchased at public foreclosure auction sales on the courthouse steps).
Buyers paying with cash accounted for 31.9 percent of last month’s home sales, compared with 34.4 percent the month before and 32.1 percent a year earlier. The peak was 36.9 percent this February, and since 1988 the monthly average is 16.1 percent. Cash buyers paid a median $305,000 last month, up 30.9 percent from a year ago.
Nearly 28 percent of the homes purchased with cash last month were priced $500,000 or above, compared with about 18 percent a year earlier. Also, of those who paid cash last month for $500,000-plus homes, 56 percent were owner-occupants and 44 percent were absentee buyers.
There was more evidence last month that credit conditions have improved.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 27.7 percent of last month’s Southland purchase lending – the highest since August 2007, when jumbos made up 36.7 percent of the market. Last month’s figure was up from 26.1 percent the prior month and 18.9 percent a year earlier. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for around 40 percent of the home loan market.
Last month 8.0 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs), up from 7.9 percent the prior month and 6.6 percent a year earlier. May’s figure was the highest since ARMs were 8.5 percent of the purchase loan market in August 2011. Since 2000, a monthly average of about 32 percent of Southland purchase have been ARMs.
The most active lenders to Southern California home buyers last month were Wells Fargo with 8.1 percent of the purchase loan market, imortgage.com with 2.9 percent, and Bank of America with 2.5 percent.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 20.7 percent of all purchase mortgages last month. That was down from 21.8 percent the month before and 30.3 percent a year earlier. In recent months the FHA share has been the lowest since spring/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 and cash buyers.
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 $1,329, up from $1,275 the month before and up from $1,100 a year earlier. Adjusted for inflation, last month’s typical payment was 44.3 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 54.4 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity remains well below year-ago and 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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