22,270 new and existing single-family residence (SFR) sales escrows were closed in May 2010 throughout the Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, which accounts for roughly 55% of the state population. This is a 10% increase from escrows closed in April.
An interesting statistic for May’s sales was the increase in sales of high-tier homes. 21.6% of all sales were for homes of $500,000 or more, an increase of over 4% from May of last year. This shift in buyer interest to high-tier homes caused the median price paid for homes to rise to $305,000, a rise of $20,000 between May 2010 and May 2009.
Finally, 6.6% of all homes purchased in May were financed with adjustable rate mortgages (ARMs), up from 5.8% seen in April, and a rise from 4.7% in May 2009. However, that is still drastically lower than the ARM average of the year 2000 which was 39.2%. [For more information on using the ratio of ARMs to gauge market health, see the March 2010 first tuesday article, The danger of an ARMs build up.]
first tuesday take: It is encouraging to see the number of home purchases on a steady incline. While the numbers are not making drastic shifts, they are positive, which is further evidence that California’s economic health is improving.
The increase in the number of high-tier properties being purchased is a result of the major price decline in that category of housing. As the wealthy see what they consider to be “good deals,” they will return to the market, and it is usually the high-tier properties that lead the market, both up and down, in sales volume. The current buying interest of the wealthy coupled with sellers of high-cost properties getting more “price-realistic” is very encouraging.
However, mid-tier property sales suffer the most in a transitioning market, and we have now entered a transitionary period that will last until mortgage rates rise – which will be around 2012, barring no surprises.
The only downside to these statistics is the small increase in ARM loans, but that is an inevitable aspect of the real estate market. There will always be those who become captivated and trapped by the enticing teaser rates ARMs boast. Given the new regulations on subprime lending and California’s newly acquired education on what exactly happens to the economy when too many of these loans are let loose, that 6.6% should not be getting anywhere near the numbers seen in the years 2000 through 2007 — at least not in the near future.
Re: “Southland median sale price back over $300K; sales at 4-year high” from Dataquick