The largely unexpected decline in house prices has been deep and long lasting, particularly in markets outside of Coastal California. Since lenders have embarked on the amend-extend-pretend policy, sales volumes have dried up, and prices edge lower as supply begins to weigh on the market.
La Jolla, CA---Southern California home sales turned in another lackluster month in March, the result of a fussy mortgage market, slow job growth and a continued wait-and-see attitude among potential buyers and sellers. There were signs, however, that the market was a little less dysfunctional than in recent months, a real estate information service reported.
I think it's sad that DataQuick feels they need to punch up their reporting with feel-good realtor nonsense. The market shows no signs of strength whatsoever. Sales are weak and prices are falling.
A total of 19,412 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March. That was up 35.1 percent from 14,369 in February, and down 5.2 percent from 20,476 in March 2010, according to DataQuick of San Diego.
Sales were dismal last year, for sales to be down despite the lower prices is surprising, and it isn't a good sign.
Sales always increase from February to March. Last month’s sales count was 21.4 percent below the 24,706 average for all the months of March since 1988. Sales so far this year are 20 percent below the norm. During the last half of 2010 sales were 25-30 percent below average.
Sales of newly built Southland homes totaled 1,144, the lowest March in DataQuick’s statistics, which go back to 1988. The peak March was in 2006 with 7,205 sales. The March new-home average is 3,661.
New home sales are at the lowest levels ever. Wow! Sales are 50% off their historic averages and 85% below the peak.
Citywide sales totaled 210 – that's down 26 purchases or 11.0% vs. a year ago. Countywide, sales were down 4.3% vs. a year earlier.
Irvine home sales were 8.6% of the countywide market in the latest period vs. 9.2% in the year-ago period.
Of Irvine's 8 ZIP codes, 4 had sales gains vs. a year ago while 3 had a gain in their median selling price vs. a year ago.
Medians within the city's ZIPs ran from $386,500 to $830,000 – while the price gap was $442,500 to $874,000 a year ago.
3 of these 8 ZIP codes beat the -0.1% overall performance of the countywide median for the past year.
Back to the DQ News press release:
The median price paid for a Southland home last month was $280,500, up 2.0 percent from $275,000 in February, and down 1.6 percent from $285,000 for March a year ago.
Sales volumes are down and prices are down. If sales volumes pick up, lenders will release more inventory. It doesn't look like prices will go up any time soon.
The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially inland foreclosures.
“As an indicator of upcoming trends, the month of March is actually pretty reliable. We got off to a slow start with sales this year and it doesn’t look like that will change anytime soon. Two of the likely game changers in the short run would be a surge in job creation or another round of price corrections,” said John Walsh, DataQuick president.
It's more likely we will see another round of price corrections before we see a surge in hiring.
“The foreclosure issue is going to be with us for a good while. But mortgage availability, or rather the lack thereof, is key. If a well-crafted home loan program comes down the pike, it’s going to make some lending institution the dominant player, at least for a while,” he said.
This is the holy grail of lending, isn't it. Financial innovation is folly. There is no mortgage innovation beyond the 30-year fixed-rate mortgage. Only the event horizon of the Ponzi abyss awaits those who eschew amortization through complicated financial innovation schemes.
Adjustable-rate mortgages (ARMs) accounted for 7.8 percent of last month’s Southland purchase loans, up from 7.7 percent in February and 4.9 percent a year ago. While still at a low level, last month’s ARM usage was the highest since 10.3 percent in August 2008. Over the past decade, a monthly average of about 42 percent of purchase loans were ARMs.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 15.9 percent of last month’s purchase lending, up from 15.6 percent in February and the same as a year earlier. In the months leading up to the credit crisis that struck in August 2007, jumbos accounted for 40 percent of the market.
Think about the Orange County housing market. How many properties require a jumbo loan for financing. More than 15.6% i imagine. If high end prices were inflated by debt, and if both loan balances and the number of transactions is declining, the only support for this market is the large down payments of the few active buyers that remain.
Foreclosure resales – properties foreclosed on in the prior 12 months – made up 36.4 percent of resales last month, down from a revised 37.0 percent in February and down from 38.3 percent a year ago. Foreclosure resales hit a high of 56.7 percent in February 2009 and a low of 32.8 percent last June.
In the post 2008 era of amend-extend-pretend and shadow inventory, foreclosure numbers don't really mean much.
Short sales – transactions where the sale price fell short of what had been owed on the property – made up an estimated 18.5 percent of Southland resales last month. That was down from an estimated 19.6 percent in February but up from 18.0 percent a year earlier and 12.2 percent two years ago.
Absentee buyers – mostly investors and some second-home purchasers – bought 26.0 percent of the Southland homes sold in March, paying a median $205,000. The absentee share of the market reached a peak in February at 26.4 percent. Over the last decade, absentee buyers purchased a monthly average of 16.3 percent of homes.
Are these the elusive foreign cash buyers being active in the high-end market? Perhaps, but increased investor activity both foreign and domestic at the low end is more likely.
Cash purchases accounted for 30.5 percent of March home sales, paying a median $205,250. The cash purchase share was down from 32.3 percent in February, the all-time high, but up from 27.9 percent a year earlier. The 10-year monthly average for Southland homes purchased with cash is 13.3 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 32.0 percent of all mortgages used to purchase homes in March – the lowest level since August 2008, when 26.8 percent of purchase loans were FHA. Last month’s FHA level was down from 32.2 percent in February and 36.5 percent in March 2010. Two years ago FHA loans made up 36.5 percent of the purchase loan market, while three years ago it was just 10.5 percent.
interesting that FHA sales are dropping off. It may be partly due to the increased cost of primate mortgage insurance on FHA loans. In fact, I have updated my cost of ownership spreadsheet to reflect the 1.15% PMI currently being charged FHA borrowers. The cost is so high that it no longer makes sense to use FHA financing in many circumstances. This increased cost is also contributing to the continued weakness in pricing across all price levels.
Last month 19.2 percent of all sales were for $500,000 or more, up from a revised 18.7 percent in February and down from 20.3 percent a year earlier. The low point for $500,000-plus sales was in January 2009, when only 13.8 percent of sales were above that threshold. Over the past decade, a monthly average of 26.9 percent of homes sold for $500,000 or more.
Viewed differently, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 35.8 percent of total sales last month. That was up from 34.8 percent in February and up from 35.2 percent a year ago. Over the last decade, those higher-end areas contributed a monthly average of 37.0 percent of regional sales. Their contribution to overall sales hit a low of 26.2 percent in January 2009.
Last month the percentage of Southland homes bought and re-sold on the open market within a six-month period was 3.2 percent, the same “flipping” rate as the month before but down slightly from 3.3 percent a year ago. Flipping varied last month from as little as 2.5 percent in Ventura County to as much as 3.5 percent in Orange County.
Not surprisingly, the flipping rate is close to the foreclosure rate.
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 that Southland buyers committed themselves to paying was $1,185 last month, up from $1,174 in February and down from $1,220 in March 2010. Adjusted for inflation, current payments are 48.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 57.4 percent below the current cycle’s peak in July 2007.
Affordability is becoming widespread in Southern California -- just not here in Irvine.
Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
Sales Volume
Median Price
All homes
Mar-10
Mar-11
%Chng
Mar-10
Mar-11
%Chng
Los Angeles
6,747
6,590
-2.3%
$329,000
$320,000
-2.7%
Orange
2,652
2,615
-1.4%
$432,000
$430,000
-0.5%
Riverside
4,156
3,843
-7.5%
$198,000
$198,000
-0.0%
San Bernardino
2,955
2,544
-13.9%
$152,000
$150,000
-1.3%
San Diego
3,227
3,063
-5.1%
$330,000
$325,000
-1.5%
Ventura
739
757
2.4%
$375,000
$349,000
-6.9%
SoCal
20,476
19,412
-5.2%
$285,000
$280,500
-1.6%
Source: DQNews.com Media calls: Andrew LePage (916) 456-7157
The spent most of it
The owners of today's featured property paid $269,000 on 1/12/2001. The used a $215,200 first mortgage, a $40,350 second mortgage, and a $13,450 down payment. A whopping 5% down.
On 9/3/2002 they refinanced with a $257,000 first mortgage and obtained about $12,000 for whatever.
On 1/10/2005 they obtained a $25,000 HELOC.
On 10/18/2005 they refinanced with a $254,600 first mortgage.
On 5/10/2006 they obtained a $125,000 HELOC.
On 10/18/2006 they refinanced again with a $305,600 HELOC.
On 12/26/2007 they got another $75,000 HELOC.
On 7/20/2009 they refinanced with a $370,000 first mortgage.
-$389 .......... Tax Savings (% of Interest and Property Tax) -$552 .......... Equity Hidden in Payment (Amortization) $30 .......... Lost Income to Down Payment (net of taxes) $78 .......... Maintenance and Replacement Reserves ============================================ $2,876 .......... Monthly Cost of Ownership
Cash Acquisition Demands ------------------------------------------------------------------------------ $4,649 .......... Furnishing and Move In @1% $4,649 .......... Closing Costs @1% $4,486 ............ Interest Points @1% of Loan $16,272 .......... Down Payment ============================================ $30,056 .......... Total Cash Costs $44,000 ............ Emergency Cash Reserves ============================================ $74,056 .......... Total Savings Needed
Property Details for 4 AMBERWOOD Irvine, CA 92604 ------------------------------------------------------------------------------ Beds: 3 Baths: 2 Sq. Ft.: 1520 $306/SF Property Type: Residential, Condominium Style: Two Level, Contemporary Year Built: 1976 Community: 0 County: Orange MLS#: S654402 Source: SoCalMLS Status: Active On Redfin: 7 days ------------------------------------------------------------------------------ Get the most for your money in Irvine! Convenience and comfort set this townhome apart. Near freeways and shopping while being adjacent to a city park, tennis courts, and bike trails (and across from a golf course) allow you to live in the city with room to breathe! Bright and open, it includes a master retreat with fireplace, garden window in the kitchen, and tons of storage space. Custom upgrades: hardwood floors, high quality carpet, duel paned windows, new doors, remodeled staircase, large entertaining patio/yard, and $25k spa-inspired bathrooms! Come for a visit. Make it your home.
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