Southland home sales dropped to the lowest level for a February in six years, as many would-be buyers struggled with inventory constraints, credit hurdles and reduced affordability, according to a report from DataQuick.
A total of 14,027 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 3.1% from 14,471 in January and down 12.0% from 15,945 sales in February 2013.
On average, sales have increased 0.7% between January and February since 1988, when DataQuick's statistics begin. February sales have ranged from a low of 10,777 in 2008 to a high of 26,587 in 2004.
Last month's Southland sales were 20.1% below the average number of sales – 17,560 – for February since 1988. Sales haven't been above average for any particular month in more than seven years, DataQuick notes.
"February was another month with lackluster home sales – and the fifth in a row where sales fell short of the same month a year earlier," says John Walsh, president of the company. "The March-through-May data will give us a better sense of what's been holding back activity the most: supply constraints or the double whammy of higher prices and higher mortgage rates.
"The drop in housing affordability is enough to nudge some out of the market. Other would-be buyers have no doubt called "time out' while re-evaluating their housing priorities or watching for signs the market has overshot a sustainable price level," he continues.
"But there's still reason to expect significant pressure on the market," Walsh adds. "The economy is growing, creating jobs. People who lost homes to a short sale or foreclosure over the last eight years will be looking to buy again. On the supply side, inventory is increasing, as it normally does this time of year, but so far, there hasn't been an explosion of new listings, and new-home construction is still well below average."
The median price paid for a home edged up slightly from January and remained nearly 20% higher than a year earlier, according to the report.
The median price paid for all new and resale houses and condos sold in the six-county region last month was $383,000 – up 19.7% from $320,000 in February 2013. The median sale price has risen on a year-over-year basis for 23 consecutive months.
Those gains have been double-digit – between 10.8% and 28.3% – over the past 19 months. Prices continue to rise at different rates depending on price segment, with the lowest-cost third of the region's housing stock seeing the greatest year-over-year increase, and the top, most-expensive third seeing the lowest.
The number of homes sold in many mid-level and high-end areas continued to rise on a year-over-year basis last month, while more affordable markets generally saw less activity than a year earlier.
Last month, the number of homes that sold from $300,000 through $799,999 – a range that includes many move-up buyers – rose 2.1% year-over-year. The number that sold for $500,000 or more increased 12.2% from one year earlier, while $800,000-plus sales rose 4.9%. In February, 32.6% of all Southland home sales were for $500,000 or more – up from 24.4% a year earlier.
The number of Southland homes that sold below $200,000 last month dropped 47.0% year over year, while sales below $300,000 fell 38.7%. DataQuick says one of the main reasons for the big decline in lower-end sales is the relatively low supply of homes on the market. Many owners still can't afford to sell their homes because they owe more than they are worth, and lenders aren't foreclosing on as many properties, further limiting supply.
Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 6.8% of the Southland resale market in February, which is down from 16.2% a year earlier. In the current cycle, foreclosure resales hit a high of 56.7% in February 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 9.4% of Southland resales last month, down from 22.4% a year earlier.
Buyers paying cash last month accounted for 30.9% of home sales – down from a record 36.9% in February of last year. Since 1988, the monthly average for cash buyers is 16.4% of all sales.
In February, home buyers forked over a total of $3.08 billion of their own money in the form of down payments or cash purchases. That was down from a revised $3.29 billion in January and down from $3.35 billion a year ago. The out-of-pocket total peaked last May at $5.41 billion.
While credit conditions remain relatively tight in an historical context, they appear to be easing, especially when compared with a year ago, notes DataQuick.
Last month, 12.9% of Southland home purchase loans were adjustable-rate mortgages (ARMs) – more than double the ARM level of a year earlier. The January ARM level (13.5%) was the highest since April 2008, when it was 16.4%.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 27.2% of last month's Southland purchase lending – up from 21.1% a year earlier. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for around 40% of the home loan market.
The most active lenders to Southern California home buyers last month were Wells Fargo with 6.7% of the total home purchase loan market, Bank of America with 2.6% and JP Morgan Chase with 2.3%.
Federal Housing Administration (FHA) loans accounted for 19.3% of all purchase mortgages last month – down from 24.6 percent a year earlier. In recent months, the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers, according to DataQuick.
The company reports that indicators of market distress continue to decline: Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable.