In La Jolla California home sales rose unseasonably last month from September as buyers shook off gloomy financial news and took advantage of often-steep discounts. The median sale price fell to $300,000 – a 67-month low – as foreclosures once again accounted for half of all resales, a real estate information service reported. Last month’s record annual sales increase reflects two things: Very weak sales a year ago on the heels of the August credit crunch and earlier subprime meltdown, and this year’s big sales gains in inland markets where prices have fallen 30% or more. Depreciation in such areas has triggered record foreclosures, which tend to sell at a discount, attracting bargain hunters.
51% of existing homes that closed escrow in October were foreclosed on at some point in the prior 12 months. That’s up from a revised 50.0% in September and 16.0% in October 2007. At the county level, these “foreclosure homes sold” ranged from 39.2% of October existing home sales in Orange County to 67.7% in Riverside County. In Los Angeles County homes sold from foreclosure were 40.3% of sales; in San Diego 48.6%; San Bernardino 65.2% and in Ventura County 47.0 %.
High foreclosure levels may explain the Southern California’s $300,000 median sale price in October, the lowest since it was $298,000 in April 2003. Last month’s median was 2.8% lower than $308,500 in September and 32.6% lower than $445,000 in October 2007. The October median stood 40.6% below the peak $505,000 median reached in spring and summer of last year. Several factors explain the plunge in the median price, the point where half of the house sold for less and half for more: Regionally home price depreciation; much slower high-end sales; and the rising market share of foreclosure home sold, which tend to be located in mid-to lower-cost areas.
Many of the region’s relatively affordable neighborhoods saw October sales more than double from a year ago. Use of FHA-insured loans allowing a down payment of as little as 3% represented nearly one-third of all Southern California’s home loans last month, up from 2% a year earlier.
Meanwhile, use of larger mortgages known as “jumbo mortgage loans,” common in higher-cost coastal neighborhoods, is still far below normal. Before the credit crunch hit in August 2007, 40% of Southland sales were financed with jumbos, then defined as over $417,000. Last month just 13.1% of home purchase loans were over $417,000.
The typical monthly mortgage payment that Southern California home-buyers committed themselves to paying was $1,413 last month, down from $1,458 the previous month, and down from $2,115 a year ago. After inflation adjustments, current payments are 33.9 % below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 45.8% below the current cycle’s peak in June 2006. Indicators of market distress continue to move in different directions. Foreclosure activity is at or near record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages.
DataQuick also reported Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat but might be emerging. MBA reported this week that home loan activity has decreased, but the home loan modification inquiries continue to soar as the foreclosure crisis worsens.