The Southland’s housing recovery held its ground in June as home sales rose, fueled by government tax incentives, but the median home price dropped a notch from May.
The median price for all new and resale single-family homes, condominiums and town homes was $300,000 in June, according to research firm MDA DataQuick of San Diego. Although that was a 1.6% drop from May, it represented a 13.2% increase from the prior year, marking the seventh consecutive month of year-over-year increases.
The median price — the point at which half the homes sold for more and half for less — has been heavily influenced by the uneven market created by the bursting of the housing bubble. Rather than a pure increase in valuations, the change in the median reflects a change in the mix of homes being sold, with fewer cheap foreclosures in inland markets and more higher-end properties in pricier coastal areas, analysts say.
A total of 23,871 homes were sold in the six-county region, a 7.2% jump from the prior month and an increase of 2.6% from June 2009, DataQuick said. The mixed data for June 2010 indicates that Southern California’s real estate market has yet to slip significantly despite big recent drops in the national housing data.
“Maybe California is leading the way, at least as far as stability is concerned, in the residential real estate sector, but it is too early to tell,” said Gerd-Ulf Krueger, principal economist with Housingecon.com.
“I would like this to continue into the next two months,” he said, “to see that California really doesn’t need any of these tax credits to show pretty good and sustainable sales activity. That would be very good news.”
The federal credit, which required that contracts be signed by April 30, offered up to $8,000 for certain buyers; the California credit offers a potential of up to $10,000 for buyers of new homes and for those buying a first home.
The expiring of the federal credit drove down the number of sales contracts signed nationwide a record 33% in May, according to government estimates, while the number of contracts on existing homes in the U.S. plunged a record 30% that same month, according to real estate industry estimates.
The magnitude of the May declines fueled concerns by some prominent national economists that the U.S. housing market was headed for a second drop, and DataQuick’s June research doesn’t mean that Southern California’s market couldn’t also stumble.
The DataQuick numbers for Southern California count sales when homes close escrow — the end of the home-buying process — and include many homes that first opened escrow during the spring’s tax-credit-fueled frenzy, making those figures lagging indicators.
But data on home purchase contracts from the California Assn. of Realtors, which are more forward-looking but less reliable indicators of sales, showed the regional market holding its own in June.
The data showed that contracts for single-family houses in seven cities — Los Angeles, Burbank, San Diego, Riverside, San Bernardino, Santa Ana and Anaheim — rebounded last month after dipping in May.
Meanwhile, the more expensive cities of Irvine, Pasadena and Santa Monica appeared unaffected by the tax credit’s expiration, with Irvine and Pasadena sales climbing steadily in April, May and June and Santa Monica registering a drop in June sales after a May surge.
“We had a good number of openings in June, which was encouraging to us,” Lakewood real estate agent David Emerson said. “They seemed to bounce back.”
Emerson also said he has sold more move-up homes in the last three months than he and his partner normally sell in a year. But most of the sales were prompted by financial difficulty, including a short sale, in which the home was sold for less than the value of the mortgage, as well as homes in various stages of foreclosure.
“They have also involved sellers setting more realistic prices, and recognizing that it will be a long time before they can get what their neighbor may have gotten back at the peak,” he said.
Michael Raich, a 45-year-old advertising executive from Calabasas, said he dropped the price on his five-bedroom home by $100,000, to $1.3 million, so that he could buy a much larger home in a more upscale community through a short sale. The price for his newly purchased property was $1.4 million, a dream home that he said he saw listed for twice as much during the boom years.
“My sense was that things were turning around a bit, and I could get what I needed for this house,” said Raich, who moved into his new digs on Monday.
He said he had several offers on his old home and was willing to accept a little less than his asking price because his newly purchased property was “phenomenal” with a “bodacious backyard” that had been featured on Home and Garden TV.
The region’s rising median price hasn’t necessarily translated into a big rebound in valuations for all homes. A DataQuick analysis showed that the biggest price gains in Southern California occurred among entry-level homes while pricier properties have shown much more modest improvement.
Those disparities have led some economists to disregard the median price as a reliable indicator of home valuations.
“The median price is very misleading right now,” said Irvine economist John Burns, who suggested that buyers interested in finding out the true value of their homes use 2003 values as a benchmark for comparison.
When the housing market collapsed in 2007, the Southland’s six-county median price initially plunged as steeply discounted foreclosures glutted the market. But it has climbed as foreclosures have made up a smaller — but still substantial — part of the sales mix. Foreclosures as a percentage of the resale market hit an all-time high of 56.7% in February 2009 and last month constituted 33%.
A much-dreaded second wave of foreclosures has yet to materialize in Southern California, helping keep a floor underneath prices. Rock-bottom interest rates could also counteract any fallout from the absence of government incentives, depending on how willing lending institutions are to qualify buyers this year, experts said.