Statewide, 37,481 new and existing homes were sold in April, up .5 % from March, and down 1.3% from April one year ago. These sales do not include trustee’s sales completing foreclosures. [For more information on trustee’s sales, see the April 2010 first tuesday article, Increase in NODs and NOTS become a buildup of REOs]
The statewide price paid for the phantom median-priced new or existing home was $255,000, the same as March, and up 15% over April 2009. These median dollar amounts, percentages and trends do not represent the market conditions for any housing, except by mere coincidence. Actual same-home, same-tract prices may be going up or down, a fact that movement in the median price cannot capture. This upward movement is likely the result of dropping prices coupled with increased sales volume in higher-tiered properties.
Of the homes sold statewide, 38% were resales of foreclosed real estate owned (REO) properties, down by 40% from one year ago when REO properties were in greater abundance. The reduced number can be attributed to the ending of federal and state intervention in recording Notices of Default (NODs) and holding trustee’s sales.
The typical mortgage payment a homebuyer committed himself to paying in April was $1,108 statewide, but $1,238 in Southern California. The trend in the typical monthly mortgage payment in Southern California as a percent of an individual’s earnings is essentially unchanged from one year earlier.
Real estate speculation remains at historically high levels. Cash buyers made up 28% of the So Cal purchases in April, unchanged since March. This percent of speculating cash buyers is significantly higher than the monthly average of 14% cash purchases for the past 23 years in Southern California. However, homes sold by flippers (those who buy and sell homes within a three-week to six-month period) only accounted for 3% of Southern California sales for April, up from 1% in April of last year.
Additionally, buy-to-let investors and second-home buyers accounted for purchases of 19% of Southern California homes sold in February.
first tuesday take: Home sales volume and pricing numbers are primarily a representation of two events: the recent government housing subsidies, and the corresponding rush of speculators into the market. When these two factors are discounted, actual sales to homebuyers are dismally reduced. Volume and pricing are in a tailspin, and the ominous decline will continue until willing homebuyers become ready once more to step up and buy a home. In the absence of government subsidies, these potential homebuyers have no incentive to stick their necks out by rushing to buy. [For more information on the effect of consumer confidence on prospective homebuyers, see the May 2010 article, Homebuyers Feel Ready and Willing to Buy, But Not Financially Able]
To reverse these conditions going forward, single-family residence (SFR) brokers and agents will need to exercise great ingenuity and innovation. They will have to get their listing prices right, require full financial participation by the seller in the cost of locating buyers, beef up the marketing information on the listed properties, and communicate the location of reasonably priced homes to those tenants who would be justified in buying. The old no-brainer routine, telling skeptical homebuyers that “now is the right time to buy,” is not going to work anymore. Buyers need reasons, not commission-based statements, to start submitting offers. So be an optimist and try something different; an approach that homebuyers might actually respond to.
For more information on California home sales volume and historical trends, see first tuesday’s Market Chart, Home Sales Volume and Price Peaks.
Re: “Southern California Home Sales Dip, Median Price Rises from ‘09”, from MDA Dataquick