Southern California home prices rise slightly in May
Southern California’s median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.
The $249,000 median price in May was up less than 1% from April’s $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.
The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down.
Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium.
“As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we’ll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose,” said John Walsh, president of San Diego-based MDA DataQuick.
A slowly growing number of buyers like Geoff Graham, 40, is changing the mix of homes sold. Graham and his husband, James Tee, 35, bought a new three-bedroom row house in San Diego’s Hillcrest neighborhood last month for $750,000.
The couple had admired the place a year ago but couldn’t believe the seller wanted $995,000. “I thought, ‘What a cool place, but who in the world would ever pay so much money for it ?’ ” Graham said.
The answer was no one.
In January, Graham and Tee saw that another row house in the development had sold for $760,000 and decided that price was within their comfort zone. The $10,000 state tax credit for new-home purchases also “made us feel a little more comfortable paying that price,” Graham said.
Homes priced at $500,000 and above accounted for 17% of Southland home sales in May, up from 15% in April, DataQuick reported.
The median price is the level at which half of the homes are sold at higher prices and half at lower prices. As higher-priced homes have trickled into the sales mix, foreclosures are less dominant. In May, foreclosed homes accounted for 50% of sales, down from 54% in April and a peak of 57% in February.
The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market’s peak.
May’s price was a 51% drop from that peak, and it was down 33% from the May 2008 median price of $370,000.
Lower prices continued to drive purchases: the 20,775 Southern California homes sold in May was up 1% from April and 23% above the May 2008 sales total.
The housing market “is starting to reach the bottom; prices have reached levels where they make sense again,” said Christopher Thornberg, a Los Angeles economist who was an early forecaster of the housing bubble.
“But hitting the bottom is different from coming off the bottom,” he said, noting that prices will probably remain low as long as “we still have a massive wave of foreclosures to deal with.”
About 150,000 homes in California were in some stage of foreclosure in May, according to ForeclosureRadar, an online seller of default data.
The median price climbed most in the region’s more affluent counties. Orange County posted the largest monthly median price increase among the Southern California counties. Its $410,000 median price was up 8% over its April median of $380,000. Ventura County’s median was up 4% in May, to $355,000 from $340,000 in April. San Diego also saw a modest 2% price increase in May, to $295,000 from $290,000 in April.
Those counties rank first, second and third, respectively, in household income among the six counties, according to the U.S. Census Bureau.
The median home price in May essentially matched April’s figure in Los Angeles ($300,000), Riverside ($180,000) and San Bernardino ($137,000) counties.
San Diego County may be a bit ahead of the local housing market curve: Its median sale price peaked at $517,500 in November 2005. That peak occurred 1 1/2 years before Los Angeles County hit its high median price in May 2007, at $550,000, according to DataQuick.
Those 18 additional months of price declines may have worn down the resistance of some San Diego sellers who until recently had expected to sell properties for near-peak prices. Kris Berg, a San Diego broker who works in the Scripps Ranch community, said homes in her area listed for around $700,000 are now selling quickly.
Those same homes might have sold for more than $900,000 at the height of the market, and until recently sellers continued to demand such prices, with few if any takers.
“A year ago, two years ago, so many sellers were still insisting their house was special. Now, the ones who want to sell are getting it; they’re pricing their homes more appropriately,” Berg said.