Southern California logged the highest February home sales in six years last month amid relatively strong sales of mid- to high-end properties and a record share of homes sold to absentee buyers. The median sale price edged slightly lower from January but rose nearly 21 percent from a year earlier, marking the 11th straight month in which the median has risen year-over-year, according to San Diego-based DataQuick.
A total of 15,945 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 0.7 percent from 16,058 sales in January, and up one percent from 15,780 sales in February 2012.
Typically there's not much change in the number of sales between January and February. On average, sales have risen 0.7 percent between those two months since 1988, when DataQuick’s statistics begin.
Last month’s sales were the highest for the month of February since 17,680 homes sold in February 2007, but they were 9.9 percent below the February average of 17,696 sales. The low for February sales was 10,777 in 2008, while the high was 26,587 in 2004.
“Our January and February stats certainly indicate housing remains a big target for investors. But typically those two months don't offer much insight into how the market will behave the rest of the year. These are sales that closed in January and February, meaning many of the buyers were out home shopping during the holiday season late last year. That's when many traditional buyers and sellers drop out of the market, leaving a relatively high concentration of very motivated market participants, especially investors,” said John Walsh, DataQuick president. “March and April will offer a better view of how broader market trends are shaping up this year. One of the real wild cards will be how many more homes go up for sale. More people who've long been thinking of selling will be tempted to list their homes at today's higher prices. Fewer people will be underwater and therefore could at least break even on a sale. Some investors who've held for a while will consider cashing in. A meaningful rise in the supply of homes on the market should at least tame price appreciation.”
The median price paid for all new and resale houses and condos sold in the six-county Southland was $320,000 last month, down 0.3 percent from $321,000 in January and up 20.9 percent from $264,750 in February 2012. The median has eased back slightly on a month-to-month basis since December's $323,000 median, which was the highest since it was $330,000 in August 2008. The median's year-over-year gains have been double-digit—between 10.8 percent and 23.5 percent— since last August.
“Most every gauge shows prices are up significantly over the past year, even after adjusting for changes in the types of homes selling,” Walsh said. “But to keep today's price levels in context, consider that last month's median sale price was still around 37 percent below its early 2007 peak of $505,000, and it was about where the median was back in mid 2003.”
Around half of the median's ups and downs the last five years can be attributed to shifts in the types of homes sold. Last month's 20.9 percent year-over-year gain in the Southland median sale price reflects the combination of price appreciation as well as a shift toward more mid- to high-end sales in coastal markets and fewer sales, especially foreclosed properties, in inland areas.
Looking at a single sub-category to help adjust for this change in market mix: The median price paid for a three-bedroom, two-bathroom, 1,250-to-1,450-square-foot house built between 1950 and 1985 was $316,500 last month. That was down 0.2 percent from $317,000 in January, and up 13.4 percent from $279,000 in February 2012.
Move-up markets continued to show big sales gains from a year earlier. The number of homes sold in February for between $300,000 and $800,000—a range that would include many first-time move-up buyers—rose 33.4 percent year-over-year. The number that sold for $500,000 or more jumped 54.0 percent from one year earlier, while sales of $800,000-plus homes increased 62.7 percent compared with February 2012.
Last month, 24.9 percent of all Southland home sales were for $500,000 or more, compared with a revised 22.2 percent in January and 17.4 percent in February 2012. Sales continued to fall on a year-over-year basis in many lower-cost communities. The number of homes that sold below $200,000 in February fell 26.7 percent year-over-year, while sales below $300,000 dipped 15.4 percent. Sales in many affordable markets have been limited not by a lack of demand, but by a lack of inventory, caused largely by the slowdown in foreclosures and the relatively high percentage of owners who can’t afford to move because they owe more than their homes are worth.
Last month foreclosure resales—properties foreclosed on in the prior 12 months—accounted for 15.8 percent of the Southland resale market. That was down from a revised 17.2 percent the month before and down from 32.6 percent a year earlier. In recent months foreclosure resales have been at the lowest level since September 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.
Short sales made up an estimated 22 percent of Southland resales last month. That was down from an estimated 24 percent the month before and 26.9 percent a year earlier. Investor and cash buying was at or near all-time highs.
Absentee buyers—mostly investors and some second-home purchasers—bought a record 31.4 percent of the Southland homes sold in February. That was up from 30.4 percent the prior month and up from 29.9 percent a year earlier. The monthly average since 2000, when the absentee data begin, is 17.9 percent. Last month’s absentee buyers paid a median $250,000, up 26.3 percent from a year earlier.
The share of homes that were flipped has risen, too: 6.9 percent of all homes sold on the open market last month had previously sold in the prior six months, up from a flipping rate of 6.6 percent in January and 3.7 percent in February 2012. Buyers paying with cash accounted for 35.6 percent of last month's home sales, compared with 33.7 percent both the month before and a year earlier. The peak was 35.8 percent last December. Since 1988 the monthly average is 15.9 percent. Cash buyers paid a median $260,000 last month, up 23.8 percent from a year ago. Credit conditions don't appear to have changed much so far this year.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 21.0 percent of last month’s Southland purchase lending, up from 19.3 percent the prior month and 14.4 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.
With fixed rates on 30-year loans so low, and aversion to risk in the marketplace high, the use of adjustable-rate mortgages (ARMs) remains very low in an historical context. Last month 5.6 percent of Southland home purchase loans were ARMs, the same as the prior month and down slightly from 5.8 percent a year earlier. Since 2000, a monthly average of about 33 percent of Southland purchase loans were ARMs.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 25 percent of all purchase mortgages last month. That was about the same as 25.1 percent the month before and down from 30.9 percent a year earlier. In recent months the FHA share has been the lowest since 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.
The most active lenders to Southern California home buyers last month were Wells Fargo with 8.7 percent of the market, Prospect Mortgage with 2.7 percent, and JP Morgan Chase with 2.5 percent. Bank of America, which had 2.2 percent of the Southern California market last month, recently announced that it was gearing up for a “new run” at the mortgage market. The bank had around eight percent of the Southland market two years ago.
The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,154, up from a $1,140 the month before and up from $998 a year earlier. Adjusted for inflation, last month’s typical payment was 51.1 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 60 percent below the current cycle’s peak in July 2007.