By Signal StaffPosted: June 27, 2008 1:54 a.m.Updated: June 27, 2008 4:59 a.m.
Sales of existing single-family homes in the Santa Clarita Valley continued their rebound in May with more than 200 homes closing escrow, according to a Thursday report from the Southland Regional Association of Realtors. Despite the improvement for single-family home sales, condominium sales remain slow while the inventory of homes for sale is dropping and inching closer towards a balanced market between buyers and sellers.During the month of May, Realtors closed escrow on 220 homes, a 22.9 percent increase from a year ago and a 23.6 percent jump from April, according to the association. May represents the fifth consecutive month of gains in home sales for the Santa Clarita Valley.May also marks the first time since June 2007 that more than 200 homes sold in a single month."Sales activity is picking up," Doreen Chastain-Shine, president of the association's Santa Clarita Valley division said in a statement. "Agents are reporting that a lot of people are coming through open houses, a lot of people are looking for a home."The median price of the single-family homes sold during May fell by 14.1 percent from a year ago to $450,000. April's median price was $480,000.The condominium median price of $305,000 was down 14.1 percent from a year ago, but up 9.3 percent from April's median price of $279,000, according to the association.The group called condominium sales for May "sluggish" because they believe that buyers are focusing on purchasing single-family homes that are being offered at favorable prices.The association explains that while home loans are available, most loans require a down payment and borrowers must show proof of income and the ability to repay the loan. This means that the pool of qualified buyers is limited."Buyers should not turn their backs on traditional buyers thinking that a foreclosure or short pay always offers the best opportunity," Link said. "Traditional sales can be completed faster, buyers have more ability to request repairs, and sellers typically are more willing to negotiate."Pending sales, which the association uses as a future resale activity, increased 19 percent from a year ago to a total of 339 open escrows.Despite the increase from 2007, pending sales fell 11 percent from April.A total of 1,946 properties were listed for sale throughout the Santa Clarita Valley at the end of May, which is down 13.1 percent from a year ago and 3.4 percent lower than April.The inventory represents a 6.6-month supply. The association believes a balanced market is when the inventory is between a 5 to 6 month supply."Despite media reports suggesting otherwise, we're not seeing a flood of inventory locally," Chastain-Shine said. "I really do believe the worst is past."
Buyers eager to capture bargains on foreclosed properties pushed sales of existing single-family homes in the Santa Clarita to their highest level in months, posting the fourth consecutive month of gains and the first year-to-year increase in 13 months, the Southland Regional Association of Realtors reported .
A total of 178 homes changed owners last month, up 2.3 percent from a year ago and 17.9 percent higher than the March tally. Sales had been trending downward since hitting a record high of 405 transactions in June 2005, but the April total was the first time since March 2007 that the total was higher than 12 months ago.
Even condominium resales posted the fourth consecutive month of increased sales with the 67 transactions during April up 24.1 percent from March. Condo sales were 1 1.8 percent below a year ago. "With about 50 percent of the current inventory consisting of foreclosed properties or short-sales, buyers are coming out in droves to take advantage of what may well be a once-in-a-lifetime opportunity," said Doreen Chastain-Shine, president of the Association’s Santa Clarita Valley Division.
"I’ve had agents call to report that a growing number of properties are receiving multiple offers within days of being listed for sale. Some of them see the price being bid up above the asking price. "It’s a very hopeful prognosis," she said. "I totally believe that the local market has hit bottom and is turning." Pending escrows - a measure of future resale activity - support that optimism.
There were 381 open escrows at the end of April, up 34.2 percent from a year ago and 24.1 percent higher on a month-to-month basis. Activity has been steadily rising since hitting bottom in December when there were a mere 160 open escrows. The record high of 662 open escrows was set in March of 2005.
"We’ll need a few more months of statistics to be sure that positive trends emerging today are solid, but the market clearly is evolving and activity clearly is on the rise," said Jim Link, the Association’s chief executive officer. "Prices will remain soft until foreclosures and short-sales caused by the sub-prime lending melt-down have moved through the system, but anyone waiting in the hope of a steep price drop probably will be disappointed and miss an excellent opportunity to buy a home."
The single-family median price has been fluctuating in the mid- to high-$400,000 range with the $480,000 median in April down 19.3 percent from a year ago, but up 2.1 percent from March. The first four months of the year saw the median slip under $500,000 for the first time in 16 months. The record high median of $643,000 was set in April 2006.
Similarly, the condominium median price of $279,000 was down 27.5 percent from a year ago, off $106,000 from the $385,000 median of April 2007. It has been slowly falling since the record high of $387,000 was set in January 2006 with the March median of $275,000 being the low point in this cycle to date.
Many factors mitigate against steep price declines, including: pent-up demand for housing in an area of the nation that will see population gains in coming years, lenders again writing loans which carry favorable interest rates, the lower cost of jumbo loans in high-cost regions now that the conforming loan rate has been increased, assistance for beleaguered home owners, which will limit the number of foreclosures, and an inventory that offers a solid selection but is not excessive.
"Unlike just a short while ago, one out of every three families throughout Los Angeles County can now afford to buy a median-priced home," Chastain-Shine said. "Consumers recognize the opportunity and realize that the first to jump into a changing market often are the ones who capture the best opportunities."
The number of homes listed for sale declined during April compared to a year ago, down 6.8 percent to 2,014 active listings.
The inventory at the current pace of sales represents a mere 8.2-month supply, still a buyers’ market yet not all that far ahead of the 5- to 6-month supply thought to represent a balanced market. It also was the first time in months that the number of active listings dropped into single-digit range, supporting conclusions that the market is changing as the Spring home-buying season gets into full swing.
The Housing Crisis Is Over
The Wall Street Journal
By CYRIL MOULLE-BERTEAUX May 6, 2008; Page A23
The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.
How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.
Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.
Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.
The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.
Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.
Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.
The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.
In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.
The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high - but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.
Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.
Inventories will drop even faster to 400,000 - or seven months of supply - by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.
Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.
Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.
This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.
When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.
More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.
A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.
We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.
Residential resale activity in the Santa Clarita Valley increased 16.2 percent during February compared to January even as the number of homes sold lagged behind the figure reported a year ago, the Southland Regional Association of Realtors® reported. A total of 1 15 single-family homes closed escrow during February. That was 60 transactions lower than February 2007, down 34.3 percent, but 16.2 percent higher than the 99 transactions that closed escrow this January.
The difference between numbers reported a year ago is high, but appears to be slowing dropping. Declines of 43.8 percent and 42.4 percent were reported in December and January, respectively.
"Business has definitely picked up compared to December and January," said Doreen Chastain-Shine, president of the Association's Santa Clarita Valley Division. ‘We're seeing more interest from buyers and more transactions going into escrow.
"Maybe it's the effect of lower prices and attractive interest rates combined with the higher limit on conforming loans and action by the federal government," she said, "but for the last three or four weeks, something has been happening."
Condominium sales during February reflected the same pattern as single-family homes. A total of 37 condos closed escrows during February, down 58.0 percent below a year ago.
However, the total was an improvement - up 19.4 percent - from the record low of 31 sales set this January.
Pending escrows - a reliable measure of future resale activity - were down 30.4 percent from a year ago, but increased 25.1 percent on a month-to-month basis.
"It's too soon to say with any certainty that we've hit bottom, but it is encouraging to see that buyers are returning to the market," said Jim Link, the Association's executive vice president. "Initial offers may come in quite a bit lower than the list price, but what's important is that there is an offer on the table.
"Negotiations cannot begin unless buyers are willing to take the first step," Link said, "and it appears that a growing number of buyers believe that now is the time to act."
Even the median price of single-family homes and condos that closed escrow during February reflected a similar pattern - a drop from year-ago levels, but an increase from the prior month.
The median price of the 1 15 homes that closed escrow was $490,000, down 14.0 from a year ago, but up 6.5 percent from the January figure. The record high of $643,000 was set in April of 2006.
The median price of the 37 condos that changed owners was $309,000, down 14.6 percent from a year, but up 8.5 percent compared to the January median. The condo record high of $397,000 was set in January 2006.
A total of 2,182 properties were listed for sale on the MLS at the end of February. That was up a modest 3.6 percent from a year ago.
"Some sellers still cling to an out-dated mentality when it comes to pricing, hoping to snag the sky-high prices that were common at the height of the housing boom," Chastain-Shine said.
"Now more owners, especially those who have been in their homes for a while and have appreciable equity, realize that price is less important than completing a sale, " she said. "Only after they sell their current home can they change roles to become a buyer and reap the benefits of the today's buyers' market. They may take a lower price when they sell, but then they'll be in a position to get the same price break when they buy, so in the end it evens out."
The inventory of existing homes listed for sale throughout the Santa Clarita Valley indicates that the market clearly favors buyers, however, the supply is not nearly as high as some buyers believe. The active inventory at the end of February stood at 2,183 units, up 3.6 percent from a year ago and less than 1 percent ahead of January.
At the current pace of sales the inventory represents a 14.4-month supply, which clearly indicates a buyers' market considering that a balanced market is believed to be in the range of a 5- or 6-month supply.
Statistics are not available to support the conclusion, but real estate experts believe today's inventory is still considerably lower than the backlog of unsold home - believed to be in excess of a 20-month supply - that existed during the national recession of the early 1990s.
The Southland Regional Association of REALTORS® has 20 grants of $4,000 each for use by low- and moderate-income individuals and families who buy a home in the San Fernando Valley or Santa Clarita Valley. The funds are paid after the close of escrow and there are no repayment requirements. Here are the requirements to qualify:
To receive the funds the applicant will need:
1. A photocopy of a picture identification, such as a driver's license.
2. A copy of the closing statement from the purchase of the home, a form that the buyer will receive from the escrow company a few days after the close of escrow.
3. The Los Angeles Housing Department loan reservation number.
4. Page 8 of the contract showing the buyer's agent.
If you feel you qualify. Contact me ASAP for more information.
Kim Thomson 661-263-0441
Home sales decreased 28.5 percent in February in California compared with the same period a year ago, while the median price of an existing home fell 26.2 percent, the California Association of Realtors® (C.A.R.) reported.
"Although sales rose for the fourth straight month in February by 9.5 percent compared to the previous month, they continued to be dragged down by the ongoing effects of both the credit/liquidity crunch and tighter underwriting standards that have reduced the pool of qualified buyers who can obtain a loan," said C.A.R. President William E. Brown.
"It is crucial that FHA reform legislation currently under consideration by congress include higher loan limits for high-cost states like California," he said. "The proposed legislation also includes a reduction in the down payment requirement for FHA loans and will include condominiums in the FHA single-family program, which will make it easier for buyers in the condominium market to qualify for loans."
Closed escrow sales of existing, single-family detached homes in California totaled 343,220 in February at a seasonably adjusted annualized rate, according to information collected by C.A.R. from more than 90 local Realtor® Associations statewide. Statewide home resale activity decreased 28.5 percent from the revised 480,170 sales pace recorded in February 2007.
The statewide sales figure represents what the total number of homes sold during 2008 would be if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during February 2008 was $409,240 a 26.2 percent decrease from the revised $554,280 median for February 2007, C.A.R. reported. The February 2008 median price fell 4.8 percent compared with January's revised $429,790 median price.
"The Federal Reserve Bank's recent action to reduce the federal funds rate will have little near-term direct effect on the housing market," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "However, Fed rate cuts should result in more favorable real estate finance rates as we move though the year."
Highlights of C.A.R.'s resale housing figures for February 2008:
C.A.R.'s Unsold Inventory Index for existing, single-family detached homes in February 2008 was 14.3 months, compared with 8.2 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
C.A.R., in participation with the Los Angeles Times, will present the Southern California Home Buyer’s Fair Saturday, April 12, and Sunday, April 13 at the Los Angeles Convention Center in downtown Los Angeles.
The SRAR Housing Committee will be present to help buyers access our $4,000 grant and understand the issues surrounding the purchase of a home in the valley.
The Southern California Home Buyer's Fair will feature more than two dozen educational seminars presented in English and Spanish, designed to address many of the concerns of first-time home buyers and arm them with all of the practical information they need to know as they begin the road to homeownership.
"As California's leading authority on the residential real estate industry, C.A.R. is well-positioned to take a front-and-center role in educating consumers about the facts surrounding today's housing market and provide them with hands-on, practical tools to help them achieve their dream of becoming homeowners," said C.A.R. President William E. Brown. "C.A.R. also is very pleased to have the Los Angeles Times on board as our co-sponsor and we look forward to working with them to produce this exciting event."
Entrance to the Southern California Home Buyer's Fair is free. The Home Buyer's Fair will run from 9 a.m. to 6 p.m. on both Saturday and Sunday.
The educational seminars will offer consumers valuable information about the many aspects of the home-buying process. Seminars will cover a broad range of topics including how to qualify for a loan; understanding credit scores; how to find a loan that's affordable; avoiding fraud; choosing and working with a REALTOR®, home insurance issues; the inspection process; and home design on a budget.
Nearly 250 exhibitors are expected to participate in the Southern California Home Buyer's Fair, including mortgage lenders; consumer credit counselors; mortgage insurance companies; home inspectors; home insurance companies; REALTORS® and REALTOR® associations; non-profit housing advocacy groups; and state and local agencies for housing and community concerns.
For more information, visit www.homebuyersfair.com
Home sales in the Santa Clarita Valley during January posted a record low of 99 transactions, down 42.4 percent from a year ago when 172 single-family homes changed owners, the Southland Regional Association of Realtors reported.
The prior record low of 105 home sales was recorded in September of 2007 while, for comparison, the record high of 405 sales was set in June 2005.
Likewise, a total of 31 condominiums closed escrow last month, down 57.7 percent from January 2007 and the lowest tally on record. The prior record low of 38 sales came in November 2007 while the record high of 204 sales was set in April 2003.
"Buyers are expecting whopping discounts and sellers are not being realistic with their asking prices," said Doreen Chastain-Shine, president of the Association's Santa Clarita Valley Division. ‘'There are plenty of opportunities, but the market is deadlocked, at an impasse, and will remain that way until buyers realize that prices are not plummeting and sellers accept that they no longer have the upper hand.
"The market is moving toward a new balance and there is a slight upswing in activity, some of which is due to seasonal factors," Chastain-Shine said, "but a stable, balanced market will not emerge until both parties get real."
The median price of single-family homes sold during January fell below the $500,000 for the first time in three and a half years. The median price of $460,000 was down 21.8 percent from a year ago and well below the record high of $643,000 set in April of 2006.
Similarly, the condominium median price fell below $300,000 for the first time in three and a half years with the $284,900 January median down 20.9 percent from the prior year. The record high of $397,000 came two years ago in January 2006.
Statistics produced by the Association indicated that the pending escrow total increased 21.9 percent on a month-to-month basis. That supports the contention that next month's sales numbers may be slightly higher.
However, pendings were down 48.7 percent compared to a year ago.
"It will take several more months before we can be certain," said Jim Link, the Associations chief executive officer, "but we believe the market is near or at the bottom of this cycle and we fully expect resale activity to pick up in the weeks and months ahead.
"Sales will not return to pre-2007 levels anytime soon," he said, "but some semblance of normalcy, stability and realistic pricing will begin to emerge."
A total of 2,163 active listings were reported at the end of January, up 22.9 percent from a year ago.
At the current pace of sales, that represents a 16.6-month inventory - a buyers' market by any definition, especially since experts believe a balanced market appears with an inventory of 5- to 6-months.
While statistics are unavailable to support the conclusion, Association executives believe the inventory was much higher during the recession of the early 1990s, a fact reflected by today's relatively modest price declines and one which weighs in against steep price discounts.
Home buyers are awakening to the opportunities available in today’s housing market even as some sellers cling to unrealistic price expectations, a stalemate that pushed sales of existing single-family homes during January - historically one of the slowest months of the year - to the lowest level on record, the Southland Regional Association of Realtors® reported.
A total of 323 single-family homes closed escrow during January throughout the San Fernando Valley, down 43.2 percent from a year ago and 17.2 percent below the December tally. It was the fifth consecutive month that sales were in the 300s. Only one other time since the Association started keeping separate sales statistics in 1984 has the monthly sales total been in the 300s - February of 1991 as the state and nation plunged into recession.
Condominium sales were down 50.2 percent from a year ago to 105 closed escrows - the lowest in years, but not the record low of 80 sales which came in February 1993.
"We expected sales to be down, given the deluge of negative news from lenders and the impasse between buyers' over-eager desires and sellers' false expectations," said Mary Funk, president of the Association. ‘We are now guardedly optimistic that the worst is past, the market is beginning to stabilize and that sales will pick up as the traditional Spring home-buying season gets underway."
Pending escrows, a measure of future resale activity, supported that positive perspective. Open escrows were down 38.2 percent from a year ago, but increased 38.1 percent from the December tally, a potentially significant increase after months of generally double-digit declines.
Funk and Jim Link, the Association's chief executive officer, said Realtors are reporting a gradual decline in the number of sellers who list their home for sale at yesterday's prices.
"Now is not the time for sellers to be dabbling in the market, holding out for a unattainable asking price when eager buyers fully understand the new realities," Link said. "It's better to take the property off the market and wait until it turns around again.
"On the other hand, buyers need to realize that prices are not nose-diving," Link said, "especially in a stable, mature economy like the San Fernando Valley where there is a finite supply of homes for sale, little space for new construction, and relatively few properties coming on the market through the foreclosure process."
Some buyers incorrectly believe that if a home is being sold as a result of foreclosure it means the property will be dramatically discounted.
"Lenders may price a foreclosure aggressively so that it competes with other listings," Funk said, "yet there are few, if any, listings at fire sale prices."
The January median price of $500,000 was down 18.4 percent from a year ago, the first time since the early 1990s that the price posted a double-digit decline and the lowest median price since the record high of $655,000 was set in June of 2007.
Even as sales were starting to slow down, prices had been rising until August of last year and posted modest single-digit drops in the last three months of 2007.
The condominium median price of $368,000 was down 3.2 percent from a year ago and posted an 11.5 percent increase on a month-to-month basis. The record high of $415,000 came in February 2006.
Today is clearly a buyers' market, but a disconnect exists between the public's perception of the inventory and the actual number of homes listed for sale.
‘The inventory is large enough to offer buyers a wide selection," Link said, "but not so large that it drives resale prices down dramatically."
A total of 6,928 active listings were reported at the end of January, up 33.1 percent from a year ago and up 22.2 percent from December.
At the current pace of sales, the 6,928 active listings represents a 16.2-month supply- an indicator of a buyers' market since a balanced market is in the 5- to 6-month range - but still no where near the record high 23.0-month inventory of February 1993 or the record high 14,976 active listings of July 1992.
"It's difficult to know if the various assistance efforts mounted by the federal government will arrive soon enough or yield a significant local impact while tighter rules on home loans limit the number of buyers able to afford a home," Link said, "but we believe the opportunities now outweigh the risks and market is beginning to level off.
"It is still a buyers' market he said, "but some time soon we expect to see a balance emerge between buyers and sellers."
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