Prices, sales point to healing sector, economist reports
By Jenni Mintz (Contact)
Tuesday, August 19, 2008
As ugly as the housing market looks, there are encouraging signs that the sector is healing, an economist said Monday.
Prices don’t appear to be falling as rapidly as they were, sales are rising, and default notices appear to be leveling off, said Mark Schniepp, executive director of the California Economic Forecast Project in Goleta.
For the first time since November 2005, monthly sales in Ventura County increased over the previous year, MDA DataQuick reported Monday. A total of 870 properties sold last month, up 11 percent from 784 in June 2007.
While that appeared promising, the median price paid for new and existing homes and condominiums remained flat at $420,000 in July, unchanged from the previous month but down 27.9 percent from $582,500 a year ago, according to the San Diego-based real estate information service, previously known as DataQuick Information Systems.
The median is the midpoint, where half the homes sell for more and half for less.
Just 21 percent of the mortgages were financed with jumbo loans last month, compared with 50.7 percent a year ago. That is partly because jumbo loans are harder to obtain and are more expensive relative to conforming loans, said Andrew LePage, DataQuick analyst.
In July, Southern California home sales rose to the highest level in more than a year, as more buyers swooped in to purchase distressed properties, according to DataQuick.
Rising year-over-year sales are the first sign that the market is healing, Schniepp said.
There were 20,329 properties sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in July, up 16.7 percent from the previous month and 13.8 percent from the same month a year ago.
Last month’s sales total was the first since September 2005 to rise above the year-ago level, DataQuick reported.
The uptick in sales was mostly driven by inland markets that posted the biggest depreciation and are now having the greatest sales appreciation, LePage said.
For example, July sales rose 48.6 percent in Riverside County from a year ago, while the median price dropped 34.8 percent, from $399,000 to $260,000.
“It’s not like there’s this real broad sales recovery from the Inland Valley to the beach,” LePage said. He added that the closer you get to coastal regions, the weaker sales are.
‘A fire sale of properties’
The median price paid for a Southern California home was $348,000 last month, down 2 percent from $355,000 in June and 36 percent from $505,000 a year ago.
Foreclosed properties accounted for 43.6 percent of the existing homes sold in the six-county region last month.
“What we’re looking at is a fire sale of properties in newer, affordable neighborhoods that were bought or refinanced near the price peak with lousy mortgages,” John Walsh, MDA DataQuick president, said in a news release. “What we’re still not seeing is this level of distress spreading to more expensive or established neighborhoods.”
Laurie Rutledge, a Realtor with Coldwell Banker Residential Brokerage in Ventura, says she’s seen an increase in activity, but mostly in the lower-end market — the $350,000 to $500,000 range.
“That price range is very hot right now,” she said.
While values are expected to remain flat for some time, Rutledge believes it’s a great time to buy.
“For one thing, there’s a lot of inventory, and interest rates are still low, and that situation may not exist when the market begins turning,” Rutledge said.
Distressed sales a factor
If notices of default fall now, then foreclosures will peak and then start to decline in December, Schniepp said. Though he does not believe prices will drop much more, he predicts more year-over-year price declines for as long as foreclosures continue to rise.
“Much of the declines we’re seeing right now is influenced heavily by distressed sales,” he said. “Those are the things that are beating down prices.”
About 36 percent of the county’s existing homes and condominiums sold in July had been foreclosed on at some point in the past year, compared to 7.7 percent a year ago.
Once inventory of distressed property has been cleared, prices will stabilize, which will lead to a sharp increase in sales by the second quarter of 2009, Schniepp said.
“Then the real estate market will become a lot healthier,” he said. “We are in the initial stages of recovery.”
Still, Schniepp cautioned that the market is still far from normal. He projects 2009 will have a solid increase in transactions and “will feel much better.” However, “we are likely not to see a normal market until 2010.”