Southern California logged its most competitive January home market in three years as buyers wrestled with a tight inventory of homes for sale, picky mortgage underwriting and the highest prices in years. The median price spent for a home dipped from December– a typical seasonal decline– but stayed 18 percent higher than January last year.
A sum of 14,471 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 21.4 percent from 18,415 in December, and down 9.9 percent from 16,058 sales in January 2013, according to San Diego-based DataQuick.
A considerable drop in sales between December and January is to be predicted since many buyers drop out of the market during the holidays and mid-winter. That means fewer transactions close in the course of January and February. On average, sales have decreased 27.6 percent between December and January since 1988, when DataQuick’s statistics begin.
Last month’s Southland sales were 17.3 percent below the historic average number of sales of 17,490 in the month of January since 1988. Sales haven’t been above average for any specific month in more than 7 years. January sales have ranged from a low of 9,983 in January 2008 to a high of 26,083 in January 2004.
“The economy is growing, but Southland home sales have fallen on a year-over-year basis for 4 successive months now and stay well below par. Why? We’re still putting a lot of the blame on the low inventory. But mortgage availability, the rise in interest rates and increased home prices matter, too,” said John Walsh, DataQuick president.
“Two of the bigger questions threatening the housing market today are,’How much pent-up demand is left out there?’ and, ‘Will inventory skyrocket this year as more owners take advantage of the price run-up?'” Walsh proceeded. “However, we’ll probably have to wait until spring for the truths. When it comes to statistical trends, January and February are atypical months that have never shown to be predictive for many years.”.
The median price paid for all new and resale houses and condos sold in the six-county region last month was $380,000, down 3.8 percent from $395,000 in December and up 18.4 percent from $321,000 in January 2013. Because of periodic changes it is common for the median to decline between December and January, with that drop averaging 2.9 percent since 1988. Last month’s median was the lowest, considering that it was $368,000 in May last year.
The Southland’s median price kept at or close to $385,000 between last June and November, then equaled $395,000 in December, which was the summit for 2013 and the top for any month since February 2008, when it was $408,000.
The median sales price has increased on a year-over-year basis for 22 consecutive months. Those gains have been double-digit– between 10.8 percent and 28.3 percent– over recent 18 months. The January median stood 24.8 percent below the peak of $505,000 in spring/summer 2007.
Prices have been increasing at different rates depending on price segment. In January, the lowest-cost third of the region’s housing stock saw a 23.3 percent year-over-year increase in the median price paid per square foot for resale houses. The yearly gain was 20.3 percent for the middle third of the market and 19.7 percent for the top, most-expensive third.
The number of homes sold in many middle and up-market areas appreciated on a year-over-year basis last month, while more affordable markets typically saw less activity than a year earlier.
Last month sales from $300,000 through $799,999– a range that consists of many move-up buyers– increased 4.7 percent year-over-year. The number that sold for $500,000 or more increased 26.3 percent from one year earlier, while $800,000-plus sales rose 36.7 percent.
In January, 32.0 percent of all Southland home sales were for $500,000 or more, down from a revised 35.0 percent in December and up from 22.2 percent a year earlier.
The quantity of Southland homes that offered below $200,000 last month dropped 46.8 percent year-over-year, while sales below $300,000 fell 37.1 percent. One of the primary reasons for the big decline in lower-end sales is the low inventory of homes on the market. Many owners still can’t afford to sell their homes because they are obligated to repay more than they are worth, and lenders typically aren’t foreclosing on as many residential properties, further restricting supply.
Foreclosure resales– homes foreclosed on in the prior 12 months– accounted for 6.6 percent of the Southland resale market in January. That was up from 5.8 percent in December and was down from 17.2 percent a year earlier. January’s foreclosure resale rate has been the lowest since early 2007. In the present cycle, foreclosure resales reached a high of 56.7 percent in February 2009.
Short sales– transactions in which the sale price fell short of what was owed on the property– made up an estimated 12.2 percent of Southland resales last month. That was below 13.1 percent in December and down from 24.2 percent a year earlier.
Absentee buyers– mostly investors and some second-home purchasers– purchased 27.5 percent of the Southland homes sold last month, up slightly from 27.2 percent in December and down from a reported 32.4 percent a year earlier. The monthly average since 2000 is 18.6 percent. Last month’s absentee buyers paid a median $325,000, down 1.5 percent from the month before and up 31.6 percent year-over-year.
In January 6.3 percent of all Southland homes sold on the open market were flipped, meaning they had previously sold off in the prior six months. That’s up from a flipping rate of 5.8 percent the month before and below 6.6 percent a year earlier. Flipping actually peaked at 7.0 percent in February 2013. (The figures omit homes resold after being bought at public foreclosure auctions on the courthouse steps).
Cash buyers last month accounted for 29.1 percent of home sales, up from 28.7 percent the month before and down from 33.7 percent a year previously. The cash share of purchases reached an all-time peak of 36.9 percent in February 2013. Since 1988 the monthly average for cash buyers is 16.4 percent of all sales. Cash buyers paid a median $344,000 last month, down 4.4 percent month-to-month and up 37.6 percent from a year earlier.
In January, Southern California home buyers forked over a total of $3.22 billion of their own money through down payments or cash investments. That was below a revised $4.34 billion in December and up from $2.89 billion a year ago. The out-of-pocket total peaked May 2013 at $5.41 billion.
Last month 13.5 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs)– more than double the ARM rate of a year earlier and the highest since April 2008, when it was 16.4 percent. Back in 2000, 31 percent of Southland purchase were ARMs.
Jumbo loans, mortgages above the old adhering limit of $417,000, accounted for 26.7 percent of last month’s Southland purchase lending. In the months leading up to the credit crunch that occurred in August 2007, jumbos made up around 40 percent of the home loan market.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, made up 20.9 percent of all purchase mortgages last month. That was up from 19.6 percent the month before and down from 25.1 percent a year earlier. The FHA share has been the lowest since early 2008, mainly due to tighter FHA qualifying standards and the difficulties first-time buyers have competing with capitalists and cash buyers.
Indicators of market distress remain to decline. Foreclosure activity stays well below year-ago and far below peak levels. Financing with several mortgages is very low, and down payment sizes are steady, DataQuick reported.