SoCal home sales rise as median prices back to 2002 levels

Dataquick is reporting that sales of existing homes throughout Southern California rose by nearly 53% between January of 2008 and 2009 as prices declined to a median of $250,000 -- down by over 50% from the peak reached in 2007 and close to the median price of $242,000 last noted in February of 2002. Still, 60% of these sales were for foreclosed homes in areas (generally inland) in which bargain hunters abound. From the press release:

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...

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...

	Sales Volume			Median Price
All homes	Jan-08	Jan-09	%Chng	Jan-08	Jan-09	%Chng
Los Angeles	3,398	4,532	33.4%	$458,000	$300,000	-34.50%
Orange	1,286	1,806	40.4%	$520,000	$370,000	-28.80%
Riverside	1,939	3,320	71.2%	$331,500	$195,000	-41.20%
San Bernardino	1,111	2,532	127.9%	$298,500	$162,000	-45.70%
San Diego	1,826	2,459	34.7%	$429,000	$280,000	-34.70%
Ventura	423	578	36.6%	$477,750	$335,000	-29.90%
SoCal	9,983	15,227	52.5%	$415,000	$250,000	-39.80%

CAR predicts home prices will decline by 6% in 2009, sales up by 12%

I've not been a big fan of the California Association of Realtors' (CAR) ability to forecast market trends over the past few years, mostly because they've been so off the mark. When the market changed on a dime from boom to bust -- something I'd predicted in early 2006 -- their economist, Leslie Appleton-Young, basically begged for more time to think of some new terms to describe what was happening. Now we know why (from a story in the Riverside Press-Enterprise, which covers part of the Inland Empire):

Association President William E. Brown said a misunderstanding of the depth of the nation's credit crisis led the association to mistakenly predict a year ago that the median price of a resale home in California would drop only 4 percent in 2008. In its latest forecast, the association assumes that the current economic recession will last through the second quarter of 2009 and then the economy will begin a "turnaround."

So what kind of turnaround? Read on:

The association predicts that in 2009 the median home price in California will decline 6 percent to $358,000 from a projected median of $381,000 this year. Sales of existing single-family homes in 2009 are projected to increase 12.5 percent to 445,000 from 395,600 in 2008. That would build on a 12-percent surge in home sales this year, which has been fueled by steeply discounted foreclosed properties.

So how realistic is this forecast? From what I've been reading, it's pretty optimistic in terms of pricing increases, although the sales projection seems reasonable due to lower prices:

However, Patrick Duffy, principal for MetroIntelligence Real Estate Advisors in Los Angeles, said the association's prediction of a 6 percent further decline in the state's home prices next year seems "optimistic" and what he would expect from an organization whose members have an interest in promoting home buying. Duffy said other economic forecasts predict California home prices to fall next year by 10 percent to 15 percent.

This opinion was based on what I've read and heard from economists I respect, some of whom are also quoted in the story:

Michael Carney, director of the Real Estate Research Council of Southern California, said he expects price declines next year in Riverside and San Bernardino counties will be greater than the 10 percent he is predicting for the state as a whole because of this region's large glut of bank-owned houses and job losses.

And then of course there's our own West Coast version of "Dr. Doom" Roubini named Chris Thornberg, and here's what he had to say about the forecast in the San Francisco Chronicle:

Sales will likely climb by about the amount the group predicts, thanks to the bargains presented by increasing foreclosure sales, but its price forecast is too rosy, said Chris Thornberg, founder of Los Angeles research firm Beacon Economics.

"The decline of 6 percent sounds like something of a pipe dream," he said. "The shear amount of momentum there is ... just phenomenal, and I find it hard to believe it's going to basically bottom out that quickly."

Thornberg believes prices will fall by at least 10 percent, and possibly as much as 15 percent.

SoCal home sales up by 9% as prices fall by 34%

I've been hearing multiple stories lately of investment pools buying up groups of foreclosed properties for as much as 50% off their last sale value, and those transactions are now starting to make the market in Southern California. Currently 45% of transactions here involve foreclosed homes, which is predicted to soon tip over 50% in the next month or two. The result? Downward pricing pressure, especially in places like the Inland Empire where more over-building occurred. So is this a good thing? A story in the L.A. Times explains:

So many foreclosed homes are for sale in Southern California that these distressed properties will soon dominate the market, forcing prices down even further.

About half the homes sold in the region in August had been repossessed, according to figures released Wednesday by the real estate tracking service MDA DataQuick, driving prices down 34% over the previous year to a median of $330,000...

Regionwide, foreclosures climbed to 45.5% of sales in August, up from 10% a year ago. In hard-hit Riverside County, about two-thirds of previously owned houses sold last month were in foreclosure.

The increase in sales of repossessed homes carries ominous implications for home prices. That's because the financial institutions that have taken over the properties are trying to sell them quickly and recover as much of the loans they made as possible.

Although few individual homeowners are willing or able to sell their homes for less than their mortgage amount, banks often sell foreclosed houses at a substantial loss to clear their rapidly growing inventory.

Potential buyers in Southern California have responded to the low prices. Sales in the region were up 9.1% in August from a year ago, according to MDA DataQuick, a development that heartened some in the industry because it came on the heels of a July increase that was the first monthly year-over-year increase since 2005.

But that doesn't mean a recovery is on the way...

Richard Green, director of USC's Lusk Center for Real Estate, said a foreclosure-dominated market was not necessarily a bad thing because the low prices could speed the market's price correction.

"Foreclosures set sort of an indicator price of where the bottom may be," he said...

Christopher Thornberg, principal of Beacon Economics, predicts that it will be six to 10 months before Southern California home prices find their bottom.

County by county, the August numbers showed serious price drops throughout the region. San Bernardino County posted the sharpest decline; its $215,000 August median sale price was down 40.3% from a year ago. Los Angeles County's median price of $380,000 was down 30.9% from a year ago. Orange County's median price of $440,000 was 31.5% lower than a year ago.

SoCal home sales jump on reduced prices

The sharp reduction in housing prices over the past year seems to have finally impacted both the psychology and the willingness of buyers to re-enter the marketplace. Although one month does not make a trend, it's the first piece of good news we've seen here in Southern California for awhile. From an L.A. Times story:

Southern California home sales rose last month for the first time in nearly three years, although prices continued their downward spiral, data released today showed...

The ongoing decline in prices appears to be spurring sales. The number of homes sold picked up in July for the first year-over-year expansion since October 2005. All counties, save Los Angeles County, posted at least a 10% increase from July 2007. The biggest gainer was the region's foreclosure nucleus -- Riverside County -- where sales jumped 48.6%.

Los Angeles County was the weak link for home sales. The region's biggest county posted an all-time July low of 6,592 sales, down 3.2% from a year ago. The median price, meanwhile, dropped 27% to $400,000.

Overall, 20,329 homes in the six-county region closed escrow last month, a 13.8% rise from a year ago...

There's no question that it's the purchase of the foreclosures that are driving local sales. Foreclosure resales in July composed 43.6% of all transactions, DataQuick reported.

The question now is, whether rising demand can counter the ongoing price descent.

July's numbers show that, although still slow, the pace of Southern California home sales may have found a floor. Each calendar month from September 2007 through June was an all-time sales low, but last month's sales number, while still below the 20-year average, wasn't the worst showing for a July.

SoCal home values down to 2004 levels, but not everywhere

There's a story in today's L.A. Times citing the latest Dataquick statistics, and of course the news remains grim: sales down by 13.6% from last June and median prices falling by over 29%:

The median home sales price was $355,000 in June, down 29.3% from a year ago. Home values are now on par with what they were in early 2004... The volume of home sales did rise 3% from May, but analysts attributed that uptick to bargain hunters snapping up foreclosed homes at steep discounts. Foreclosed homes made up 41.1% of the homes sold in June, the first time the percentage has topped 40% in this real estate cycle. Last June, foreclosed homes made up just 7.3% of home sales... Price declines continued to be more severe in the Inland Empire, where overbuilding was more prevalent. But Los Angeles and Orange counties recorded median price declines of 24% and 23%, respectively, in June from a year ago. Year-to-year price declines in L.A. and Orange Counties had remained below 20% as recently as March.

However, these are still regional stats, and specific neighborhoods perform differently due to proximity to employment, transit, shopping and other factors. That's why I really liked the following map created by Tim Nebb, who blogs for the Los Angeles region for Redfin. Here's what he found:






I wanted to see at a glance how different areas of the Valley fared in this decline. So I used DataQuick’s Southern California home resale data for May as published in the Los Angeles Times and filtered it for Valley zip codes and cities. I combined and averaged the single-family home data - condo data excluded - for cities and neighborhoods comprising multiple zips like Glendale (8 zip codes), Burbank (5) and North Hollywood (4). Then I sorted the cities by per cent decline from the year before.

So is this accurate? For my particular piece of Sherman Oaks, I'd say yes. Maps like this are also a great opportunity for local papers such as the L.A. Times, the Daily News, etc., both in print and online. Assuming, of course, they have the staff to create them.