Price drop gives home sales a lift
Southern California’s median home price slipped slightly in April, new figures show, but the volume of home sales tells a tale of two housing markets.
In distressed areas such as the Inland Empire, homes are selling at a quickening pace, as buyers snap up foreclosed properties at cut-rate prices. But in more expensive areas such as Pacific Palisades and Corona del Mar, activity is still largely frozen. Many well-heeled homeowners who aren’t under financial pressure to sell are keeping their properties off the market or holding out for prices that buyers are either unable or unwilling to pay.
“Until those people are forced to sell, they’re not going to,” said Richard Green, director of USC’s Lusk Center for Real Estate. “That might change if lots of high-income people lose their jobs.”
Southern California’s median home price was $247,000 in April, down from $250,000 in the first three months of the year, San Diego-based MDA DataQuick reported Tuesday.
The median price -- the point at which half the homes sell for more and half sell for less -- will rise if a greater number of pricier homes sell.
Manhattan Beach real estate agent Ed Kaminsky said he was beginning to see some signs of a thaw. This month, he sold a four-bedroom house in that coastal community for $2.6 million -- $400,000 less than the seller paid for it in 2006. The owner had listed the house for sale at $3.45 million in 2007, but pulled it from the market at that price when he got no takers. Until recently, sellers in upscale communities swore they were immune to the housing market downturn, Kaminsky said.
“When it first started, they said it’s just the low end. Everyone said, ‘We’re different.’ We’re not,” Kaminsky said.
Still, he said many sellers in high-end ZIP Codes still believe their properties can command what they did at the top of the market. Buyers think otherwise. Sales in Manhattan Beach were down 12% in April from a year earlier.
Meanwhile, inland communities including Lancaster, Perris and Indio posted record or near-record high sales totals in April, DataQuick reported. Sales tripled in a Palmdale ZIP Code where the median price dropped 57% to $53,000.
April’s median home price for six Southern California counties was 51% below its 2007 peak. The low prices continued to attract buyers. The total of 20,514 homes sold last month was up 5.2% from March and up 31.4% from a year earlier, DataQuick reported.
The rise in home sales is an important step to housing market recovery, UC Irvine economist Kerry Vandell said, because the sales help to clear the market’s glut of homes.
“There seems to be some market clearance going on,” said Vandell, director of the Center for Real Estate at the university’s Merage School of Business. Among lower-priced homes, “product is moving, which will in fact stabilize that [segment] of the market.”
In April 2008, foreclosed homes made up 38% of homes sold. Last month, previously foreclosed homes accounted for 54% of the sales total. April was the seventh consecutive month in which most homes sold in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties had been foreclosures.
The trend of falling prices drawing buyers has been slowly working its way up the price ladder. A year earlier, the median home price was still a hefty $435,000 in Los Angeles County, and home sales were down 31% from April 2007. With Los Angeles County’s median at $300,000 last month -- down 31% from a year ago -- sales were up 28% from April 2008.
The connection between prices and sales was clear in two adjacent Woodland Hills ZIP Codes last month. In one, the median April sales price fell 27% from a year earlier to $521,000 -- and home sales were up 86%. In the other ZIP Code, the median price fell by a more modest 15% to $605,000, and April sales fell 9% from a year earlier.
The worst may be yet to come for wealthier areas because “we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on ‘option ARM’ and ‘stated income’ loans used in mid- to high-end markets,” DataQuick President John Walsh said.
Interest rates remain relatively high and credit standards tough for “jumbo” mortgages of $417,000 and above. DataQuick reported such loans comprised about 11% of mortgages for homes sold last month, down from about 40% of sales in late 2007.
Mortgage defaults in Los Angeles County have been rising at a faster rate this year than in the Inland Empire, which saw its wave of foreclosures earlier. In the first quarter of 2009, Los Angeles County default filings -- the first stage in the foreclosure process, which occurs when a borrower has missed multiple payments -- were up 38% in Los Angeles County from the same period last year. In Riverside County, defaults in the first quarter were up 13%, and in San Bernardino defaults for the quarter rose 19%, according to DataQuick.
But Los Angeles County’s median home price actually held steady in April for the fourth month in a row, and San Diego’s median rose a bit from March to $290,000, up from $285,000. The median price can rise as a greater number of higher-priced homes sell -- even if prices for those individual properties fall.
“If the bottom is flat but the top goes down, you can get a paradoxical outcome,” Green said. “The median price goes up even as prices are falling.”