Housing market shows new life
Southern California’s housing market showed fresh signs of a comeback last month as first-time buyers took advantage of a federal tax credit aimed at keeping the fragile recovery on track.
And the tax credit program, which was expanded this month, may be helping boost the all-important move-up market as people who already own homes started traipsing through open houses looking for good buys.
“We are seeing signs of life,” said Glenn Kelman, chief executive of online real estate brokerage Redfin.
But whether the burgeoning interest translates into even more sales remains to be seen, experts say.
In October, the median price paid for all homes in six Southland counties rose to $280,000, up 1.8% compared with the previous month, and the number of homes sold increased 2.8%, San Diego research firm MDA DataQuick reported Tuesday.
Spurred by low interest rates and cheap foreclosure properties, as well as the $8,000 tax credit for first-timers that had been set to expire Nov. 30, the region’s median sales price has risen or held steady on a month-to-month basis since hitting a low in April.
One key test will be whether those who own a home will begin re-entering the market. Congress this month extended the controversial tax credit until April 30, expanded it to include a $6,500 credit for current homeowners buying houses worth $800,000 or less, and stretched the qualifying income limits to $125,000 for individuals and $225,000 for joint tax filers.
Real estate agents already are using the tax credit’s extension to attract potential buyers. And some say the extension has at least sparked curiosity.
In the first week of November, as Congress was approving the tax credit bill, traffic at real estate website Trulia.com, for instance, increased 75% to record levels compared with the same week last year.
On Sunday, a steady stream of potential buyers roamed through a two-story, five-bedroom home in Los Alamitos listed at $697,777. Brochures and an assortment of stale chocolates sat on a living room table as a stereo played jazz.
“Did you know about the new tax credit?” real estate agent Blair Newman asked prospective buyers.
Andre Wills and his wife, Kim, of Carson, said they were shopping for a new home because of the tax credit, lower prices and a desire to move into a neighborhood with a good school district.
“The market is down now, and so I want to take advantage of it,” Andre Wills said as his sons, ages 6 and 9, played basketball in the driveway.
Unlike first-time buyers motivated by deeply discounted home prices, many current homeowners faced with uncertain employment prospects and falling home values have shied away from buying again.
And some are virtually trapped in their houses -- 1 in 5 homeowners in the Los Angeles area live in houses that are worth less than their mortgages, according to Zillow.com.
“The mid-range homes and the move-ups are really going to show the economy is back and that housing has stabilized,” said Daniel Penrod, senior industry analyst with the California Credit Union League.
Sales of previously owned Southern California homes in the $300,000-to-$800,000 range -- typical of the move-up homes eligible for the tax credit -- have plummeted as a percentage of the market over the last two years. Homes in that range accounted for 39.3% of the market in October, up from a low of 33.8% in April but well off a high of 77.1% in November 2006, according to DataQuick.
Despite signs of improvement, mortgage delinquencies are still rising in the nation and have jumped above 10% in California, according to a report Tuesday from TransUnion.
The credit information supplier says that during the third quarter, nearly 10.2% of home loans in the Golden State were 60 days or more past due.
That was up from 9.7% in the second quarter and 5.8% in the third quarter of 2008. California’s delinquency rate was far more severe than the national average of 6.25% (up from nearly 4% a year earlier) and higher than in all states but Nevada (14.5%), Florida (13.3%) and Arizona (10.4%).
Recent gains in home prices have been driven by cheap foreclosure properties in Southern California as banks unloaded their inventory at steeply discounted prices.
In October, sales of houses and condos that had been foreclosed on in the last 12 months made up 40.6% of all Southern California sales, down from a high of 56.7% in February.
Critics of the tax credit for first-time buyers contend that it hasn’t really flushed out new purchasers because many probably would have bought anyway. Some analysts also are skeptical that the extension of the credit will motivate buyers in pricier markets such as Southern California.
“This money is not going to become a major factor,” said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University in Orange. “What is more important for the move-up market is the job outlook.”
The $280,000 October median price -- the point at which half the homes sold for more and half for less -- was down 6.7% from $300,000 a year earlier, according to DataQuick. It was the median’s smallest annual decline for any month since September 2007 and marked 26 months of declines in the year-over-year median home price, DataQuick said.
Southern California’s median in October was 44.6% off the July 2007 peak of $505,000. Sales of homes in October were the highest for that month since 2006, with 22,132 new and previously owned homes sold.
Two counties in the region managed to eke out gains in year-over-year sales prices. Orange County saw a 3.9% median price increase in October to $436,500, while prices in San Diego County rose 0.5% to $325,000. It was the second consecutive increase for Orange County and the first in more than three years for San Diego County.
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Times staff writer E. Scott Reckard contributed to this report.
