Southern California housing market is flat in February
Southern California’s housing market couldn’t shake off the doldrums in February despite record demand from investors and all-cash buyers.
The median home price increased 1.9% in February from January to $275,000. That was unchanged from the same month a year earlier, according to DataQuick Information Systems of San Diego.
Sales remained weak, declining 0.6% from January and down 6.4% from February 2010.
With the spring selling season approaching, many real estate professionals found little reason for optimism.
“I don’t see any basis for prices to climb at this point,” said Glenn Kelman, chief executive for the online brokerage site Redfin. “I am not one of those people who think they are going to fall much further. What I am mostly worried about is just the stalemate. The buyers we are talking to are just frustrated. They feel that there is nothing good to buy.”
A total of 14,369 newly built and previously owned houses and condominiums sold in Southern California last month, the lowest for a February since 2008. February’s sales fell 19.5% below the average level for the month.
Robert Kleinhenz, deputy chief economist with the California Assn. of Realtors, said that aside from their concerns over the direction of the economy, potential buyers face difficulties getting a mortgage.
“When they finally get around to looking seriously at a home and wanting to make an offer, they have difficulty finding financing,” Kleinhenz said. “The trouble with trade-up buyers — they may have lost equity because home prices have fallen.”
Although the sales pace remains sluggish, it would not take much to see an improvement, DataQuick analyst Andrew LePage said.
“There is a lot of pent-up demand,” LePage said. “If the economy can improve and people begin to feel more confident about their employment situations, then sales could increase significantly. It’s easy to go up from here.”
Cash-rich investors are likely to continue to constitute a big part of the market in coming months because these buyers can close deals faster than regular buyers, who must wait for their loans to be approved by banks.
Robert Fragoso, executive vice president of Anchor Loans, a source of financing for investors, said that although house flippers dominated the investment ranks a year ago, these days all kinds of nonprofessionals have jumped into the game, including small-business owners and retirees. Concerned about the potential for inflation and looking for a solid investment, these people are sinking their money into real estate as an investment rather than as a source of immediate returns, he said.
“You now have a lot of buy-and-hold investors because there are a lot of opportunities,” Fragoso said. “It is everybody. I just had a guy who came into our office. He owns a body shop, and he said, ‘You know, I have a million dollars. I want to start investing.’ ”
Fragoso said his lending firm had started selling properties that it acquired wholesale and had scaled back its rehabilitation activities.
In Southern California last month, the number of distressed sales — the combination of foreclosures and short sales — accounted for well over half of the market for previously owned properties, DataQuick said.
Foreclosures made up 37.1% of the market and short sales 19.8%. Absentee buyers — mostly investors and some second-home purchasers — bought a record 26.1% of Southland homes sold in February, paying a median $198,000. Buyers who paid cash accounted for a record 31.7% of February home sales, paying a median $200,000.
Investors scooping up properties at low levels are keeping prices down.
Stan Humphries, chief economist at Zillow.com, said the main reason the median home price that DataQuick publishes had not fallen further was because more sales were occurring in higher-priced neighborhoods. The proliferation of big-ticket sales boosts the median price — the point at which half the homes sold for more and half for less — disguising that values are actually continuing to fall, he said.
According to DataQuick, Southland ZIP Codes in the top third of the housing market, based on historical prices, accounted for 34.6% of total sales in February, up from 33.4% in January and 32.7% in February 2010.
New-home sales continue to struggle the most. The 847 newly constructed homes sold in the region last month marked the second-lowest level on record for a February, behind 842 sales in February 2009. Builders are faced with steep competition from distressed properties.
Despite these head winds, builder confidence improved slightly in March, according to an index released by a trade group Tuesday. The index, from the National Assn. of Home Builders, rose a single point to 17 after remaining flat for four consecutive months.
The reading of 17 was the index’s highest level since May 2010. Any number above 50 indicates that more builders view sales conditions as good than poor. Regionally, results were mixed. The Northeast posted a 1-point decline to hit 20, the Midwest was flat at 12, the South gained 2 points to hit 20 and the West gained 4 points to reach 17.