California housing sales continue to grow
September sales for the Sacramento region and southern California continued to show strong increases. I have been providing regular monthly updates on this site concerning the sales results for the Sacramento region with occasional data on the rest of California and Nevada. For September the region did not follow the usual seasonal slowdown at the end of summer and sales continued to increase.
Sales for the three county Sacramento area increased 135% over September 2007 sales. Sacramento county and West Sacramento sales increased 8% from August and exceeded 2,000 closings for the first time since August 2005. The median home price continues to fall with over 60% of sales consisting of bank owned real estate. Available inventory also fell 31% from a year earlier and now represents a 3-4 month supply. Quote from Michael Lyon, CEO of Lyon Real Estate on why prices continue to fall in the light of tightening inventory:
Banks are desperate to get bad loans off their books by pricing their foreclosed homes low for quick sale.
His thoughts on the current market:
….this is the hottest buyers market this region has ever seen. Record numbers of buyers are taking advantage of these deep discounts and low interest rates.
Southern California also came in with nice sales gains for September. Home sales were up an unprecedented 65% from September 2007 when the credit crunch first hit the jumbo mortgage market. Total sales for the 6 county region were also 6% greater than August 2008 breaking with historic seasonal trends. Sales of foreclosed properties made up 50% of escrow closings, up from 45% in August. The lack of availability has had a significant affect on the high end of the regions sales and the median sales price. Before August 2007, 40% of mortgages in the region were of the jumbo variety. In September 2008 only 13.% of new mortgages were jumbo. Sale prices are averaging about 30% lower than a year ago and average mortgage payments have fallen by the same amount.
At this point one might expect a leveling off of prices as sales increase and inventory decreases. However, we have the same stupid bankers who made the stupid loans in the first place dumping the homes they now own at stupid prices. I believe the available bank owned property in the smaller Sacramento market will start to decrease but the southern California market still has a lot of foreclosed property to work through. With new home builders now building at the levels of when the state’s population was 1/3 of what it is now supply will be rapidly absorbed. And we have yet to see the full effect of recent interest rate cuts on mortgage rates. I do not know when home prices will reverse but I believe the predictions of late 2009 are too pessimistic. There are many factors trending in favor of a faster turn around.
Sources: TrendGraphix, DataQuick, Sacramento Association of Realtors
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Peter, I have entered your email for future articles. You should get a verification from Feedburner.
The Financial Times has reported a sharp increase in the practice of gazundering. Homebuyers are taking advantage of the housing slump by asking for a cut in the property price at the last minute. It says that most of these offers are now coming in at minimum 10-15 per cent below the asking price!
Over here in the UK prices are dropping so fast that banks are forced to sell at sometimes around 50% of what assets were worth 12 months ago. Some banks have been encouraging the sell and rent back schemes as a way of encouraging investors to buy some of their stock and reduce the number of foreclosures!
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Thanks.
Peter