Last month in Southern California, approximately 21,502 homes and condos were sold. This number is down from July of this year by 11% and up from August of last year by 11%, when the real estate market was near its lowest point since World War II.
This downturn is blamed on thinning real estate owned (REO) properties — reduced marketability of Multiple List Service (MLS) inventory — and uncertainty over financing.
Out of the Southern California homes sold in August, 39% were real estate owned (REO) properties, down 46% from one year earlier. Lenders held off commencing foreclosures due to state and federal moratoriums during the first quarter of 2009, but that all changed by the second quarter.
The median price of all homes sold in California during August 2009 dropped 17% from the year earlier.
However, the median is a mathematical abstraction — statistical alchemy. The median provides no reliable picture for changes in home values. Homes in higher-end neighborhoods have not come down in value nearly as much as the price dropped for newly constructed homes or homes in low-tier communities with high foreclosure rates.
The median price, for what it is worth, will rise once exotic loans, jumbo loans & adjustable-rate mortgages (ARM) become more available, and demand for these loans increases for purchase of high-end homes as owners run out of the savings to make payments and are increasingly pressured by foreclosure to sell.
Nearly 40% of all loans in Southern California were jumbo loans in 2007. Last August, only 16% of loans were jumbo loans.
The percentage of loans originated as adjustable rate mortgages (ARMs) has doubled since April 2009.
Also, FHA mortgages accounted for 37.4% of all purchase-assist loans in August, nearly the same as the previous month.
first tuesday take: Sales numbers may be up from last year, the worst year for real estate sales volume since WWII, but market price is still below 2002 levels, or worse. [See first tuesday Market Chart: California Tiered Home Pricing]
Sales have been increasing due to the number of REO properties entering the market which must be moved. This (and a number of other factors) has kept market prices down.
MLSes in January of 2009 had a huge inflow of REOs, but as of April, the REO properties became a mere trickle. Now the MLS is dry of REOs, which leaves virtually no properties with equity to sell. This is the result of wrong-headed government interference — delaying the inevitable foreclosures and preventing the marketplace from clearing out insolvent homeowners and the properties they occupy.
But a delay is a temporary fix. 600,000 foreclosures will take place in California over the next 2 – 3 years. Coming into 2010 and for 18-to-24 months following, the supply of MLS REO inventory will exceed housing demand.
If the government had allowed lenders to manage foreclosure on insolvent owners in an orderly fashion, the resulting swelling of 2009 REO inventory would have humbled lenders and their arrogant representatives who treated real estate agents representing buyers rather callously this year.
Re: “Southland home sales fall; median price edges up again” from DQNews.com.
It makes no sense for a “free-market” economy to be so controlled. We do the politicians always seem to think they can create a new set of regulations to solve the problems of older regulations. The market needs to self correct. Let me market do what it needs to and stop interfering with tax credits, and other tax incentives.
We’ll only get past this mess once the problem properties are resold.
With REO’s being the largest part of our current market, and the so-called moratorium for most of the year, (I say so-called because I believe that was an excuse to kill the real estate market as we know it) Myself and many of my fellow real estate professionals are hanging on by our teath, or out of business or looking for part time work to keep us going untill this mess clears up. One of my asset managers was told in June to take her vacation in July as she would not have time in Aug. Of course nothing happened and we are still waiting for the release of the REO’s. Here are my questions, 1. If there are from 5 to 70 plus, (yes I said 70) offers on each property, does it not make sense to release more bank owned assets to help get our economy moving? If real estate drives the nations economy, why are the various government entities seeming to do everything they can to kill the market? If every million dollars spent in real estate turn into ten million, same question, why are the bank owned asset being help back?