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The number of homes sold in June in Southern California rose to their highest level since 2006. The enticement: Price declines of as much as 26% from a year ago.
A total of 23,262 houses and condos changed hands in Southern California last month, according to the San Diego-based research firm MDA DataQuick. That was up 12.0 percent from 20,775 homes in May and up 29.0 percent from 18,032 a year ago.
Southern California had been one of the most feverish markets during the housing boom. Now it looks to be crawling out of the bust.
Sales have increased year-over-year for 12 consecutive months. June’s sales were the highest for that month since 2006, when 31,602 homes sold. June sales peaked at 40,156 in 2005 and hit a low last year.
Foreclosures were a major force in the market, but their impact eased for the third consecutive month. Homes that sold in June that had been foreclosed on in the prior 12 months – represented 45.3 percent of sales last month, down from a peak 56.7 percent in February of this year.
Lower prices are enticing buyers. The median price paid for all houses and condos was $265,000, up 6.4 percent from May but down 26.4 percent from $360,000 a year ago. It was the second consecutive month in which the median rose on a month-over-month basis.
Lower prices mean people can actually afford their mortgages. The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,193 last month, down from $1,762 a year ago, Dataquick says. Adjusted for inflation, current payments are 46.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 55.7 percent below the current cycle’s peak in July 2007.
Sales of single-family houses priced $500,000 and above rose to 19.6 percent of all existing houses sold in June. That category had been as little as 13.4 percent of sales in January.
“The rising median should still be viewed mainly as a sign the market’s moving back toward a more normal distribution of sales across the home price spectrum,” said John Walsh, DataQuick’s president. “What’s missing, still, is a wide-open financing spigot for the would-be buyers of these more expensive homes.”
Bank of America made the most home purchase loans in Southern California with about 20 percent of the market. Wells Fargo has 10 percent of the market.
Investors bought 18.6 percent of the homes sold last month, up from 16.1 percent a year ago but down from 19.5 percent in May. The monthly average since 2000: 15 percent.
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.