August Home Sales in Southern California Hit Highest Point in Seven Years
Home sales in Southern California were the highest for an August in seven years, as strong activity above $300,000 compensated for a dip in sales below that level, as well as fewer cash and investor purchases. The median sale price held steady compared with June and July but rose 24.6 percent from a year earlier, marking the eighth consecutive month with a year-over-year gain over 20 percent, according to San Diego-based DataQuick. A total of 23,057 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 0.8 percent from a revised 23,253 sales in July, and up 2.8 percent from 22,438 sales in August 2012. Last month’s sales were 12.8 percent below the average number of sales, 26,452, in the month of August since 1988, when DataQuick’s statistics begin. Southland sales haven’t been above average for any particular month in more than seven years. August sales have ranged from 16,379 in August 1992 to 39,562 in August 2003. The median price paid for all new and resale houses and condos sold in the six-county region last month was $385,000, the same as in June and July and up 24.6 percent from $309,000 in August 2012. The $385,000 median over the past three months is the highest since April 2008, when the median was also $385,000. The median price has risen on a year-over-year basis for 17 consecutive months. Those gains have been double-digit—between 10.8 percent and 28.3 percent—over the past 13 months. Last month’s 24.6 percent annual gain in the Southland median was lower than the 28.3 percent annual increase in June and the 25.8 percent annual gain in July. Last month’s median remained 23.8 percent below the peak $505,000 median in spring/summer 2007. The median fell by $256,000 from that peak to its $249,000 trough in April 2009, and it has now regained just over half of that peak-to-trough loss. In a sign of continued market confidence, Southern California home buyers continue to put near-record amounts of their own money into residential real estate. In August they paid a total of $4.68 billion out of their own pockets in the form of down payments or cash purchases. That was down from a revised $5.18 billion in July and up from $4.24 billion a year ago. The out-of-pocket total peaked this May at $5.41 billion. “There’s something for everyone in today’s housing data. Sellers have seen an amazing price jump from just a year ago, allowing many to finally sell at a profit," said John Walsh, DataQuick president. "Home shoppers have more properties to choose as we begin to see a ‘supply response’ to higher values. Price pressures appear to be easing, though, amid higher mortgage rates, more supply and fewer cash and investor purchases. As we head into fall and winter, a slower time of year, we’ll probably see year-over-year price gains continue to taper." It appears that most of last month’s 24.6 percent year-over-year increase in the Southland median sale price reflects rising home prices, while a small portion reflects a change in market mix. (This change consists of a big increase in mid- to high-end sales and a big decline in sales of lower-cost distressed properties.) In August, the lowest-cost third of the region's housing stock saw a 23.3 percent year-over-year rise in the median price paid per square foot for resale houses. The annual gain was 21.2 percent for the middle third of the market and 17.4 percent for the top, most-expensive third. Sales activity in the middle and upper price ranges continues to far outpace sales in the more affordable markets. Last month the number of homes that sold from $300,000 through $800,000—a range that would include many move-up buyers—rose 31.4 percent year-over-year. The number that sold for $500,000 or more jumped 48.7 percent from one year earlier, while $800,000-plus sales rose 48.0 percent. In August, 32.6 percent of all Southland home sales were for $500,000 or more, down from a revised 33.2 percent of sales the month before and up from 23.3 percent a year earlier. The number of Southland homes that sold below $200,000 last month dropped 32.8 percent year-over-year, while sales below $300,000 fell 24.9 percent. Low-end sales have been relatively weak largely because of an inadequate supply of homes for sale. Many owners still can’t afford to sell their homes because they owe more than they are worth, and lenders aren’t foreclosing on as many properties, further limiting supply. In August, foreclosure resales—homes foreclosed on in the prior 12 months—accounted for 7.1 percent of the Southland resale market. That was down from a revised 7.7 percent the month before and down from 19.2 percent a year earlier. Last month’s foreclosure resale rate was the lowest since it was 5.5 percent in June 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009. Short sales—transactions where the sale price fell short of what was owed on the property—made up an estimated 13.6 percent of Southland resales last month. That was the lowest level since it was also 13.6 percent in April 2009. Last month’s short sale figure was down from an estimated 14.6 percent the month before and down from 26.6 percent a year earlier. Absentee buyers—mostly investors and some second-home purchasers—bought 26.3 percent of the Southland homes sold last month, which is the lowest share for any month since it was 25.1 percent in November 2011. Last month’s level was down from 27.4 percent the month before and down from 27.2 percent a year earlier. The absentee share has ratcheted down gradually each month this year since hitting a record 32.4 percent in January. The monthly average since 2000, when the absentee data begin, is 18.3 percent. Last month’s absentee buyers paid a median $310,000, up 31.4 percent from a year earlier. After hitting a peak earlier this year, the share of homes flipped has generally trended flat to lower. Last month, six percent of all Southland homes sold on the open market had previously sold in the prior six months. That’s the same as July’s flipping rate and up from 5.1 percent a year earlier. Buyers paying with cash accounted for 27.6 percent of last month's home sales, down from 30.0 percent the month before and down from 32.3 percent a year earlier. The cash share of purchases has declined each month since hitting an all-time peak of 36.9 percent this February, and in August was at its lowest level since it was 26.2 percent in September 2010. Since 1988 the monthly average for cash buyers is 16.2 percent of all sales. Cash buyers paid a median $325,000 last month, up 31.0 percent from a year ago. Credit conditions continued to improve modestly. Last month 11.6 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs)—the highest for any month since ARMs were 12.6 percent of the market in July 2008. Last month’s ARM level was up from an ARM share of 10.9 percent the prior month and 5.9 percent a year earlier. Since 2000, a monthly average of about 32 percent of Southland purchase loans have been ARMs. Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 27.2 percent of last month’s Southland purchase lending—the third-highest, behind June and July, since August 2007, when jumbos were 36.7 percent of the market. Last month’s figure was down from 27.9 percent the prior month and up from 20.3 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. The most active lenders to Southern California homebuyers last month were Wells Fargo with 7.8 percent of the purchase loan market, Bank of American with 2.8 percent and IMortgage with 2.6 percent. All lenders combined provided $6.36 billion in mortgage money to Southern California home buyers in August, down from $6.52 in July and up from $5.45 in July last year. Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 19.1 percent of all purchase mortgages last month. That was up a hair from 19.0 percent the month before and down from 27.1 percent a year earlier. In recent months the FHA share has been the lowest since spring 2008. The decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers have competing with investors and cash buyers. The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,545, up from $1,537 the month before and up from $1,124 a year earlier. Adjusted for inflation, last month’s typical payment was 35.5 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 47.1 percent below the current cycle’s peak in July 2007.