Southern Californians are shopping for homes again, optimistic that values have been beaten down about as low as they will go and triggering the highest sales levels in more than two years.
A report released Tuesday shows a sharp rise in home purchases and an increase in median prices for a third straight month -- suggesting that the two-year decline in home values may finally be over.
In Los Angeles County, the median home price hit $321,000 last month, after lingering at $300,000 for most of the year. Orange County median home values rose to $420,000, up from a low of $370,000 in January.
Lower-priced homes are getting most of the action, with bidding wars for homes listed at $500,000 or less. The median Southland home sales price stood at $268,000, far below the 2007 peak of $505,000.
But the low prices are driving sales, which were up 19% last month over July 2008, according to figures released by MDA DataQuick.
Demand is heaviest for entry-level and mid-market homes because buyers such as David Soldinger, 27, think those prices won’t go any lower.
Soldinger, an assistant to a film director, said he bid on 12 houses from Silver Lake to Sherman Oaks over the last eight months, losing every time -- often to people making all-cash offers. He said eight of the 12 houses had been foreclosed upon, and all were listed below $500,000.
The first house Soldinger went after, in Hollywood, got 26 offers in four days, he said.
“There was such a small inventory,” said Soldinger, who rents a loft in downtown Los Angeles. “Any time something decent would come on [the market], you’d go to see it and there would be 12 people there in five minutes.”
Soldinger said his offer -- under $450,000 -- was finally accepted this month for a three-bedroom house in Van Nuys.
Gerd-Ulf Krueger, principal economist for HousingEcon .com, a real estate consulting firm, said such fast and furious action is common for homes that won’t require a “jumbo” loan of $417,000 or more.
“The big action is now in the low to mid-scale,” Krueger said.
Listings of homes for sale “at least at the low and mid-level are pretty much empty. There’s not a lot of supply,” Krueger said. “The question is, to what degree the low supply has an artificial character.”
Krueger was referring to a backlog in the foreclosure process that has reduced the inventory of homes for sale. Thousands of homes are in default but haven’t been repossessed because of foreclosure moratoriums. Even homes that have been repossessed by lenders have been slow to be put on the market.
According to DataQuick, foreclosure sales are on the decline -- falling in July to 43% of home sales, down from a peak of 57% in February. But DataQuick analysts said that trend could reverse itself if the foreclosure logjam was broken and if unemployment worsened.
Because of that, DataQuick President John Walsh cautioned that declaring a housing market bottom “remains an especially risky call to make, given the uncertainty over the magnitude of future job losses and foreclosures.”
“Even if we are at or near the bottom,” Walsh said, “history suggests we could bounce along that bottom for quite a while.”
Despite its recent rise, the median price remains at 2002 levels and is 47% below its peak set during several months in 2007. The median is the point at which half the homes sold for more and half for less.
Analysts say the recent increase in the median price also reflects the fact that more expensive homes are selling again after a long drought. In many affluent neighborhoods, real estate agents say, owners are finally accepting the diminished value of their properties and pricing their homes to sell.
That is beginning to attract more buyers. Malibu, Beverly Hills, Brentwood and Del Mar all posted July sales increases over the prior year.
The number of homes in the foreclosure process remains high. In July, nearly 125,000 homes in California were scheduled for foreclosure auctions, nearly double the number during the same month the previous year, according to ForeclosureRadar, an online seller of default data. The company said the increase in pending foreclosures was the result of lenders postponing repossessions.
That “shadow inventory” of homes is likely to be sold this year and next, which could again give mid-range buyers the upper hand in home purchases.
In Burbank, for instance, about 130 single-family homes are listed for sale below $1 million, but more than 350 such properties are in some stage of foreclosure, according to ForeclosureRadar. That may be why the number of Burbank single-family homes sold in July this year -- 58 -- was identical to last July, even though the median sales price fell 4%, to $519,000, according to DataQuick.
Prices could fall further when more foreclosed properties are put on the market, especially if lenders dump a large number of homes at once, Krueger said. More likely, he said, they will release homes for sale at a measured pace.
Despite strong demand in the mid- to low end of the market, another housing boom is unlikely, said Richard Green, director of USC’s Lusk Center for Real Estate.
He said homes priced close to $500,000 aren’t likely to move much higher in price because the buyers interested in those properties would not be able to obtain or afford larger mortgages. Those home shoppers would also be more likely to rent rather than buy if prices got too high because rents remain relatively low, Green said.
“I’m not expecting any big increase in house prices” in the mid-market, Green said. “We’ll just get to where they’ll stop falling, and maybe go up a little bit.”
The DataQuick numbers include single-family houses and condominiums in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties. The number of homes sold in the region last month increased 3.6% from June.
The median price paid in Southern California for July, $268,000, was still down 23% from July 2008, DataQuick reported. But prices have been rising for the last three months, gaining 6% in June to $265,000 and 1% in July.
Condos and houses priced below $500,000 constituted 80% of sales in July, down from 85% in March, DataQuick reported.
Overall, the nation’s housing market remains wobbly. Economists cheered last month when the Census Bureau reported that groundbreaking on new homes went up from May to June.
But Tuesday, the Census Bureau said housing starts declined 1% in July from June’s level.