Big Changes in Southern California Home Sales

Posted by: Chris Palmeri on September 16, 2009

For months the big story was how fast California home sales were rebounding as investors snapped up cheap, foreclosed homes. Now the sales and price trends are reversing.

In August the number of homes sold fell nearly 11% from July. Last month was the 14th in a row with a year-over-year sales increase, however.

The median sale price edged up for the fourth month in a row. The median price was $275,000 in August, up 2.6 percent from July, and down 16.7 percent from $330,000 in August 2008. The month-to-month increase was the fourth in a row after the median fell to a more-than 7-year low of $247,000 in April. The median peaked at $505,000 in mid 2007.

“There’s still a lot of uncertainty out there about prices, interest rates and the availability of mortgage money,” says John Walsh, president of real estate research firm MDA DataQuick. “We don’t know if this drop in foreclosure resales is temporary. We’re hearing from public agencies and the banking industry that there’s still a lot of financial distress in the pipeline.”

Foreclosures accounted for 38.8 percent of August’s sales activity, down from 40.7 percent in July. In February this year it peaked at 56.7 percent.

DataQuick reports that homes in older, more costly neighborhoods have come down in value by about half as much as those in newer, more affordable neighborhoods.

Some more stats showing how dramatically the market has changed.

Loans above $417,000 – formerly the definition of a jumbo loan – accounted for nearly 40 percent of all home purchases before the credit crunch hit two years ago. Last month they accounted for 15.6 percent, up from a low of 9.3 percent in January 2009.

Adjustable-rate mortgages, which have accounted for 39.8 percent of all home purchase loans over the last 20 years, accounted for 3.9 percent last month, up from 1.9 percent in April this year.

At the same time, a common form of financing used by first-time home buyers in more affordable neighborhoods remains near record levels. Government-insured, FHA mortgages made up 37.4 percent of all purchase loans in August, up from 37.0 percent in July and 27.1 percent in August last year.

Reader Comments

Lisa

September 16, 2009 8:40 AM

Lisa - are you on the current mortgage? If you are not, you may be eligible for the first time buyers initiative {$8K back and very low rates} with a 'co-signer'.

Rob

September 16, 2009 8:53 AM

Do the "sales" numbers account for the fact that when a home transfers from an owner to a bank during forclosure, it shows up as a "sale" in the MLS system and on county records? Also, the "sale price" is simply the transfer of the debt to the bank. In most cases the debt value is more than the house is worth thus leading to false positives in the data ("Home prices on the rise"). This is a mess any way you look at it.

Richard Michael Abraham

September 16, 2009 7:30 PM

Bernanke says Recession over. Do you really believe it?

The GDP measures Gross National Product/economic growth. The cash for Clunkers, record home foreclosure and short sales, $8,000 first time home buyer tax credit, and government stimulus edged up the GDP to egregiously justify a "by definition" statement such as "Recession Over." But now, as the giveaway money runs out, keep your eye on the ball, October, November, December, 2009. In real estate, think of it this way: You bought a home for $500,000 in 2005. A month ago your home had fallen in value to $250,000. The $8,000 tax credit created more buying. Your home value went up to $253,000. Would you announce to the world that the real estate market is no longer in dire straights?

Warmest,

Richard Michael Abraham, Founder

The REDI Foundation www.redii.org info@redii.org

wowlfer

September 16, 2009 8:50 PM

It's falling again because the deadline is rapidly approaching for the $8,000 credit. Unless congress widens this to include all Americans and increases it ab it to $10,000 and perhaps $15,000 then your going to see a precipitous drop in home prices during the next TWO to THREE years as much as already they have dropped because foreclosures are going to INCREASED greatly as many more ARMS reset in 2010 and 2011. So many more homeowners are underwater that the only thing that will reverse this is to increase home subsidization (such as interest deductions) or credit extensions beyond December 1st. If nothing is done your going to see some LARGE banks fail next year including Wells Fargo.

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September 22, 2009 1:41 PM


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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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