Statewide, 27,858 new and existing homes were sold in January, down 33.4% from December, and down 5.4% from January one year ago. 15,361 of these homes were sold in Southern California (So Cal), down 31.2% from December, and up 0.9% from one year ago.
The statewide price paid for the phantom median-priced new or existing home was $247,000, down 6.4% from December and up 10.3% from one year ago. This reflects an increase in sales volume (not price) of mid-tier and high-tier single family residences (SFRs) and a decrease in sales volume of low-tier SFRs. The mythical So Cal median price was $271,500, down 6.1% from its December price of $289,000, and up 8.6% from one year ago. These median dollar amounts, percentages and trends do not represent the market condition for any specific home, except by mere coincidence, and actual same-home, same-tract prices could be going up or down, a fact that movement in the median price cannot capture.
Of the homes sold statewide, 44% were resales of foreclosed real estate owned (REO) properties, down from 58.2% one year ago when REO properties were in greater abundance due to the lack of federal and state intervention. Foreclosed properties accounted for 42.1% of So Cal resale activity.
The typical mortgage payment a homebuyer committed himself to paying was $1,064 statewide and $1,170 in So Cal. The So Cal typical mortgage payment is up from the $1,081 paid in January of 2009.
The number of foreclosures going to trustee’s sales has decreased in recent months, though is still comparatively high by historical standards. [For more information on the past, present and future of foreclosures, see the February 2010 first tuesday Market Chart, “NODs and Trustee’s Deeds: Grim signs of real estate’s present condition.”
first tuesday take:
A sharp decrease in home sales between December and January is normal. Buyers are unlikely to buy, and sellers looking for a match are unlikely to sell during the winter season.
Despite foreclosure resales accounting for nearly half of the California market in January, the number of houses with delinquent loans that have not been foreclosed upon remains at peak levels. The trustee foreclosure sales and REO resales resulting from current delinquencies will add to MLS inventories and will continue to pull down prices until 2011 within the tier of the properties being foreclosed. In this respect, a shift to foreclosing on high-tier properties is now taking place. Additional downward price adjustments will have to be made by all types of sellers in coming months, as the interest rate moves up and buyers will be able to borrow less to buy the same home they looked at in January.
Lenders can procrastinate all they want by issuing extend and pretend modifications, but they are going to have to foreclose on and get rid of these negative equity properties at some point — and as they do, home prices will not rise, but will either become stable or continue their seemingly inexorable march downward. All this is good news for homebuyers, and the brokers and their agents who represent them. It is bad news for the cash-paying speculators who purchased over a quarter of the California homes sold in January. Speculators will be hard pressed to flip these houses as they’re forced to compete with the price-dampening effect of an ever-increasing number of relatively cheap REOs, rising mortgage rates and falling consumer confidence levels. Instead, they may well end up as landlords, turning to tenants to help reduce their negative cash flow until the market finally stabilizes and begins what will be a slow climb in price to a profit — which will most likely only amount to the rather modest annual rate of consumer inflation for the next five to six years. Brokers and their agents who have price-neutral attitudes will be kept busy as the less risk-averse “bottom fishers of old” and the smart money return.
Re: “California January Home Sales” and “Southland home sales, median price edge above year-ago level” from DataQuick