Southland home prices looking up
Southern California home prices may have finally hit bottom, with median values rising last month for the first significant increase in two years, new data show.
Along with the 6.4% rise in prices from May, fewer than half of the sales were foreclosures -- the first time that has happened in nine months.
“I think we can now say with fair degree of confidence the pace of real home price declines has slowed dramatically,” said Los Angeles economist Christopher Thornberg, who was an early predictor of the housing bubble.
But Thornberg and other analysts cautioned that the housing market remained wobbly and prices wouldn’t rise substantially in many neighborhoods for months or even years. The median price of $265,000 is far below the 2007 peak of $505,000.
What’s more, California is struggling with one of the highest unemployment rates in the nation and mortgage defaults are continuing to rise. A surge in new foreclosures could squelch any potential recovery in the housing market.
Foreclosures have dominated the Southland residential market for months, with most of the activity centered in distressed areas such as the Inland Empire. By contrast, last month’s gain was driven by sales of higher-end homes in the six-county region, which pulled up median prices.
That presents a mixed picture. Although prices have firmed at the low end of the market, they are still falling in affluent communities, the home sales data released by MDA DataQuick on Wednesday show.
The high-end market did not suffer the rapid shock of subprime mortgage defaults and foreclosures that hammered the housing market’s lower end. Sales stagnated as wealthier sellers held out for higher prices.
Now, however, some sellers “are realizing the market’s not going to just bounce back” and are starting to sell homes for less than they had recently hoped to get, said T.J. Culbertson, a Beverly Hills real estate broker.
That has drawn buyers to the leafy suburbs, looking for deals.
“Sales in many higher-cost neighborhoods couldn’t have gotten much lower, so this recent uptick in activity should come as no surprise,” MDA DataQuick President John Walsh said. “The recession and problem mortgages are fueling more high-end distress, hence more high-end bargains.”
The percentage of homes that sold in June for more than $500,000 rose to about 20% of all homes purchased, up from 18% in May.
The median home sales price has been leveling off all year, hovering around $250,000 for five months before June’s 6.4% increase over May’s $249,000 median price.
June’s median, though, was 26% below that of June 2008, and prices remain at 2002 levels. The median is the point at which half the homes sold for more and half for less.
In a positive sign, only 45% of the homes sold had been foreclosed upon, DataQuick said, the lowest percentage since July 2008. Foreclosures peaked at 57% of total sales in February, and in May still accounted for half of home sales.
That trend of declining foreclosure sales could be reversed if a large backlog of Southern California homes in the foreclosure process end up being repossessed.
In May, 9.5% of California mortgages were in default, up sharply from 5.8% in May 2008, according to First American CoreLogic Inc. The actual number of foreclosures has been slowed thanks to government moratoriums and voluntary efforts by lenders, but that could change if banks are overwhelmed by escalating defaults.
But Culbertson, the real estate broker, said the freeze in mortgage financing for so-called jumbo loans was starting to thaw. Banks also appear more willing than they were last year to complete short sales, in which a home is sold for less than its mortgage amount.
The share of Southland home purchase loans above $417,000 rose to 14.8% in June, the highest since 15.6% last August and up from 12% in May, DataQuick reported.
The typical monthly mortgage payment for Southern California buyers last month was $1,193, up from $1,052 in May. Adjusted for inflation, current payments are 46% below typical payments in the spring of 1989, the peak of the prior real estate cycle.
Escrow closed on a total of 23,262 new and resale houses and condominiums in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties last month. That was up 12% from 20,775 in May and up 29% from a year earlier.
Los Angeles County’s median home price in June was $320,000, up from $300,000 in May but down about 23% from a year earlier.
In Orange County, the median price went from $410,000 in May to $418,000 in June, DataQuick said. That’s 11% below year-earlier levels.
The median price in San Diego County rose from $295,000 in May to $314,000 in June, or about 15% below year-earlier levels.
Year over year, the biggest price drop in June was in San Bernardino County, where the $140,000 median price was off almost 42% from a year earlier. That was still a slight increase over May’s $137,000.
Elsewhere, the June median in Riverside County fell 33% from a year earlier to $185,000. In Ventura County, the median dropped 13% to $365,000.