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Southern California Housing Market Trends Southward in November

NationalMortgageProfessional.com
Dec 16, 2013

Southern California’s housing market downshifted in November, with sales falling well below a year earlier as investor activity waned again and buyers continued to struggle with higher prices and a thin supply of homes for sale. The median sale price held nearly steady for the sixth consecutive month, though it was still almost 20 percent higher than a year ago, according to San Diego-based DataQuick A total of 17,283 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 14.2 percent from 20,150 sales in October, and down 10.4 percent from 19,285 sales in November 2012. On average, Southland sales have declined 7.6 percent between October and November since 1988, when DataQuick’s statistics begin. Last month’s sales were 19.8 percent below the average number of sales – 21,559 – in the month of November. Southland sales haven’t been above average for any particular month in more than seven years. November sales have ranged from a low of 13,173 in November 2007 to high of 31,987 in November 1988. The median price paid for all new and resale houses and condos sold in the six-county region last month was $385,000, up 0.3 percent from $383,750 in October and up 19.9 percent from $321,000 in November 2012. Last month’s $385,000 median price ties June, July and August as the highest for this year. The last time the median was higher than $385,000 was in February 2008, when it was $408,000 (the median was $385,000 in March and April of 2008). The median sale price has risen on a year-over-year basis for 20 consecutive months. Those gains have been double-digit – between 10.8 percent and 28.3 percent – over the past 16 months. November’s 19.9 percent year-over-year gain is the lowest since the median rose 19.6 percent last December. The November median was 23.8 percent below the peak $505,000 median in spring/summer 2007. “November sales were pretty underwhelming. The exact cause is tough to pinpoint, but we see likely culprits: The inventory of homes for sale still falls short of demand. Also, any pullback in home buying during the early-October fiasco in Washington D.C. would have undermined November closings, and we know investor and cash buying continued to drop,” said John Walsh, DataQuick president. “Meanwhile, home prices aren’t soaring anymore but they’re also proving to be sticky,” Walsh said. “The price jumps we saw earlier this year were driven in large part by the supply-demand mismatch. This spring could bring a substantial surge in inventory as more homeowners look to cash in on higher values. If that happens it’s going to make big price jumps less likely.” It appears that almost all of last month’s 19.9 percent year-over-year increase in the Southland median sale price reflects rising home prices, while a very small portion reflects a change in market mix. (This mix change consists of a significant increase in mid- to high-end sales over the last year and a big decline in sales of lower-cost distressed properties.) In November, the lowest-cost third of the region's housing stock saw a 20.4 percent year-over-year rise in the median price paid per square foot for resale houses. The annual gain was 21.5 percent for the middle third of the market and 16.9 percent for the top, most-expensive third. Sales in the middle and upper price ranges continued to outpace activity in the more affordable markets. Last month the number of homes sold from $300,000 through $799,999 – a range that includes many move-up buyers – rose 5.0 percent year-over-year. The number that sold for $500,000 or more increased 12.1 percent from one year earlier, while $800,000-plus sales rose 5.1 percent. In November, 32.1 percent of all Southland home sales were for $500,000 or more, down from a revised 32.8 percent the month before and up from 24.7 percent a year earlier. The number of Southland homes sold below $200,000 last month dropped 43.7 percent year-over-year, while sales below $300,000 fell 36.7 percent. Low-end deals have fallen 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. Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 6.3 percent of the Southland resale market in November. That was the same as in October and was down from 15.4 percent a year earlier. The October/November foreclosure resale rate was the lowest since it was 5.5 percent in May 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 12.7 percent of Southland resales last month. That was the lowest since October 2008, when it was also 12.7 percent. Last month’s short sale figure was down from an estimated 12.9 percent the month before and down from 26.6 percent a year earlier.   Absentee buyers – mostly investors and some second-home purchasers – bought 26.1 percent of the Southland homes sold last month. That’s the lowest share for any month since it was 25.1 percent in November 2011. Last month’s absentee level was down from a revised 27.1 percent the month before and down from 28.7 percent a year earlier. The absentee share has trended lower almost every month this year since hitting a record 32.4 percent this January. The monthly average since 2000, when the absentee data begin, is 18.5 percent. Last month’s absentee buyers paid a median $315,000, down 1.6 percent from the month before and up 23.5 percent year-over-year. In November 5.8 percent of all Southland homes sold on the open market were flipped, meaning they had previously sold in the prior six months. That’s down from a flipping rate of 6.5 percent the month before and down from 6.1 percent a year earlier. Flipping peaked at 7.0 percent in February this year. (The figures exclude homes resold after being purchased at public foreclosure auction sales on the courthouse steps). Buyers paying cash in November accounted for 27.2 percent of home sales, down from 28.7 percent the month before and down from 34.0 percent a year earlier. The cash share of purchases has trended sideways or lower each month since hitting an all-time peak of 36.9 percent this February. In November the cash share was at its lowest level since it was 26.2 percent in September 2010. Since 1988 the monthly average for cash buyers is 16.3 percent of all sales. Cash buyers paid a median $342,750 last month, up 0.8 percent month-to-month and up 29.3 percent from a year earlier. Last month, Southern California home buyers put $3.5 billion of their own money on the table in the form of a down payment or as an outright cash purchase. They borrowed $4.9 billion in mortgage money from lenders. Credit conditions don’t seem to have changed much in November but the difference from a year ago is significant. In November 11.2 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs) – double the rate of a year earlier. Last month’s figure was down from 12.0 percent the month before and up from 5.6 percent a year ago. Since 2000, a monthly average of about 31 percent of Southland purchase loans have been ARMs. Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 27.8 percent of last month’s Southland purchase lending. That was up from 26.3 percent the prior month and up from 21.2 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. Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 20.3 percent of all purchase mortgages last month. That was up from 19.5 percent the month before and down from 25.4 percent a year earlier. In recent months the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers. DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,517, up from $1,499 the month before and up from $1,132 a year earlier. Adjusted for inflation, last month’s typical payment was 36.6 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 48.1 percent below the current cycle’s peak in July 2007.    Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
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