Home Prices In Southern California Up for the First Time Since 2007!

Posted by: Chris Palmeri on June 17, 2009

Southern California home sales rose for the 11th consecutive month in May. Even more significant: The median price increased slightly from the prior month for the first time since July 2007.

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The research firm MDA DataQuick attributes the price bounce to a shift in the type of homes sold. Previously all the action was in deeply discounted foreclosures. In May sales of $500,000-plus homes started to come back.

A total of 20,775 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 1.3 percent from April and up 22.8 percent from a year ago. May’s sales were the highest for that month since May 2006.

Homes sold that had been foreclosed on in the prior 12 months accounted for 50.2 percent of all resales. That was down from a peak of 56.7 percent in February. Sales of homes priced $500,000 and above rose from 15.2 percent of the market in April to 17 percent in May.

The median price paid for all new and resale houses and condos sold was $249,000, up 0.8 percent from $247,000 in April but down 32.7 percent from $370,000 a year ago. The median price hadn’t risen from one month to the next since July 2007.

“We appear to be in the early stages of the market gradually tilting back toward a more normal balance of sales across the home price spectrum,” said John Walsh, MDA DataQuick president. “We’ll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose.”

DataQuick says the big reason why higher-end sales were so slow was the lack of “jumbo” mortgages needed to buy such homes. During the boom, nearly 40 percent of SoCal sales were financed with jumbo loans. Last month it was only 12.0 percent, though that was up from 10.6 in April.

Reader Comments

Dr George

June 17, 2009 6:32 PM

As a matter of fact, the rise in median price reflected a decrease of price in the segment above $500,000, which in turn generated more sales activity. Many sellers are finally willing to face reality and dropped their asking price. Foreclosure activities have been rising in that segment as well.
Hopefully the new BoA Jumbo program will further "defrost" this segment when other banks are willing to follow suit.

Strategery

June 17, 2009 9:30 PM

My guess is that most of the half-million dollar (and up) houses are being sold to those with money; i.e. politicians, CEOs, actors, etc. Money is not an issue for the rich, as they keep getting richer while everyone else gets poorer (welcome to globalization and the transformation to a 3rd world America). It would be more interesting to see the data on just the 'starter' houses and the sales going to those in the middle and working classes.

moneymanagementradio.com

June 18, 2009 10:27 AM

Spin again. Median prices increased as more jumbo loans are defaulting raising the median price. It only means the more expensive houses are now the next wave.
moneymanagementradio.com

Bill Kear

June 18, 2009 11:54 PM

There are several ways to profit from
from the rise or fall of the housing market without having to lock in a position for years. In fact you can buy and sell housing futures in a 30 second time span for a $8 commission.
Trade interest rates/copper/silver
energy with the same leverage. Why bother buying a second home and tying up all your cash with the huge transaction costs, maintenance, etc.
Bill Kear

mark

June 19, 2009 6:18 PM

higher ends are the next wave. no doubt about it. recently seems like sellers are listing higher than just 2 months ago. Must be like rising equity market cheering them on.

Russ Wetherill

June 22, 2009 11:04 AM

Welcome to Pollyanna Land, home of the blindly optimistic.

I would advise caution in purchasing a home at this point - too many uncertainties remain in the housing market: 1) Alt-A, option ARM reset wave (8/2009-6/2012); 2) current loan delinquency rates > 9%; 3) market manipulation by restricting housing supply (foreclosure shadow inventory); 4) market manipulation by increasing demand ($8K Fed first-time buyer program, $10K Cal. new home purchase, artificially low interest rates increasing purchasing power, low down payment requirements through FHA); 5) U6 unemployment rate > 15%; 6) California government meltdown/layoffs; 7) seasonality of pricing (2/90-3/91 price decrease, 4/91-8/91 price increase, 9/91-6/94 price decrease - Case Schiller Los Angeles median aggregate home prices).

The Federal Reserve, the US Treasury, The United States Congress, the President of the United States, the California Legislature, all the major banks, realtors, home sellers, and home builders are all actively working to artificially prop up home prices. The game is being fixed, and not in the favor of buyers. Ref. - Cal. foreclosure moratorium, 0/.25% federal overnight/target rates, $300B treasury bond purchase program, etc.. Obama is mortgaging an entire generation by deficit spending about $2T this year alone. Deficit spending will ensure that taxes will have to be raised in the future to service the debt. This will cause home prices to either drop further or stagnate because people will have less take home pay to make mortgage payments.

My advice is to do what I am doing: rent a nice house in an area where you like, raise your family, save your money and let someone else bear the risk of depreciating real estate values. When a state of normalcy returns, then buy a house - you should get a fair price.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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