First-time tax credits helped increase sales
TUESDAY, JULY 13, 2010 AT 8:21 P.M.
Southern California market
| All Homes | #Sold June-09 | #Sold June-10 | Pct. Chng | $Median June-09 | $Median June-10 | Pct. Chng |
| Los Angeles | 7,636 | 7,849 | 2.8% | $320,000 | $335,000 | 4.7% |
| Orange | 2,958 | 3,423 | 15.7% | $418,000 | $445,000 | 6.5% |
| Riverside | 4,694 | 4,645 | -1.0% | $185,000 | $210,000 | 13.5% |
| San Bern. | 3,438 | 3,179 | -7.5% | $140,000 | $160,000 | 14.3% |
| San Diego | 3,692 | 3,885 | 5.2% | $314,250 | $335,500 | 6.8% |
| Ventura | 844 | 890 | 5.5% | $365,000 | $384,000 | 5.2% |
| Southern Calif. | 23,262 | 23,871 | 2.6% | $265,000 | $300,000 | 13.2% |
JUNE HOUSING PRICES FOR SAN DIEGO COUNTY
| Median prices | June ’09 | May ’10 | June ’10 | Change June ’09-10 |
| Resale houses | $350,000 | $377,000 | $380,000 | 8.6% |
| Resale condos | $210,000 | $235,000 | $219,250 | 4.4% |
| New homes/condos* | $455,500 | $399,000 | $431,000 | 5.4% |
| Combined | $314,250 | $340,000 | $335,500 | 6.8% |
| Sales | June ’09 | May ’10 | June ’10 | Change June ’09-10 |
| Resales houses | 2,299 | 2,335 | 2,301 | 0.1% |
| Resale condos | 1,101 | 1,212 | 1,163 | 5.6% |
| New homes/condos* | 292 | 332 | 421 | 44.2% |
| Combined | 3,692 | 3,879 | 3,885 | 5.2% |
While Southern California’s housing market isn’t in good shape, it has been gradually improving over the past year. Now housing experts are asking whether the market is healthy enough to continue progressing on its own.
The next couple of months will go a long way toward providing an answer, said John Walsh, president of industry research firm MDA/DataQuick.
Tax credits for first-time homebuyers officially expired in April, but buyers still could get the credit as long as their purchase was completed by the end of June. That helped spur sales activity throughout Southern California last month, according to DataQuick.
“More money was spent last month buying homes in Southern California than in the past two years, and more money was loaned,” said Walsh. “The tax credits had something to do with that, though it’s not clear exactly how much. With the impact of the credits fading fast, the next few months will tell us a lot.”
Although Congress extended the deadline for sales to be completed until the fall, in part because foreclosures and short sales often drag out for months, the tax credit benefit on the overall market is probably limited going forward.
That could create a headwind for housing this summer and fall. “We’ve already seen it,” said Kevin Parra, president of Plaza Home Mortgage in San Diego. “Our refinance business is up, but the purchase business has dropped off noticeably.”
Last month, 23,871 new and resale homes sold in the six county Southern California region. It was the strongest June for the sheer number of sales since 2006.
The median price of $300,000 in June marked a 13.2 percent improvement over June 2009.
“The market was wildly out of kilter a year ago,” said Walsh. “Now it’s just somewhat out of kilter. We’re still seeing a lot of bargain hunting, and we’re not seeing much discretionary buying.”
How far is the market from normal? Consider:
• Recent foreclosures made up 33 percent of June sales, excluding new homes, in Southern California. The monthly average for foreclosure sales is 15.2 percent, based on DataQuick’s records dating to 1995. Foreclosure sales peaked at 56.7 percent of purchases in February 2009.
• Sales of high-priced homes — those $500,000 or more — made up 20.8 percent of purchases last month, compared with an average of 40.6 percent over the past decade.
• Absentee buyers, mostly investors but some second homebuyers, bought 19.7 percent of homes last month. Over the past decade, absentee buyers have made up 15.8 percent of purchasers on average.
According to Walsh, the single biggest issue holding back housing — particularly for high priced homes — is the availability of mortgages.
“Rates may be at record lows, but that doesn’t mean much if the lender won’t qualify you.” he said.
Only 6.6 percent of Southern California buyers took out adjustable rate mortgages to buy a house last month, according to DataQuick. Historically, 43.9 percent of the region’s home purchase mortgages since 2000 have been adjustable rate loans.
Jumbo loans — usually used by buyers of expensive homes — accounted for 17.3 percent of Southern California mortgages last month, compared with nearly 40 percent in 2007 at the height of the most recent housing bubble.
For comparison purposes, DataQuick calculates jumbos as mortgages above $417,000, which previously was the threshold for jumbo loans before lawmakers raised the limit in certain high-priced states.
Parra of Plaza Home Mortgage offers a jumbo loan at 4.75 percent with points and fees. To get this loan, though, borrowers must have a high credit score, at least 20 percent down payment and enough cash reserves in the bank to cover 12 months of mortgage payments.
It’s a rare borrower who meets those requirements, he said. “It’s not so much the pricing or availability, it’s the tight credit,” he said. “I think there is demand. It is just very difficult to qualify.”
