Southern California Home Buyers ignore bad financial news
Southland home sales up, prices down; foreclosures now half the market.
October home sales data is starting to come in for the California markets and the positive trends are continuing. I had read several articles predicting that home sale would stall as buyer’s fear was incited by the stock market crash. Southern California home buyers did not slow down as the 6 county region had October sales 5% higher than September, 66% higher than October 2007, the highest monthly sales this year and the highest monthly sales in 20 months. Buyers were taking advantage of low prices on foreclosed homes as over half of the sales were these type of properties.
An interesting fact in the report shows there is plenty of room for sales growth. Although the October sales number was the 4th straight month of year over year increases (after 33 months of decreases) the October sales number was still 12% below the 21 year average for October.
The median home price for the region fell to $300,000. I think a couple of excerpts from the Data Quick report explain it best:
Several factors explain the plunge in the median price, the point where half of the homes sold for less and half for more: Regionwide home price depreciation; much slower high-end sales; and the rising market share of foreclosure resales, which tend to be located in mid-to lower-cost areas.
Many of the region’s relatively affordable neighborhoods saw October sales more than double from a year ago. Use of FHA-insured loans allowing a down payment of as little as 3 percent represented nearly one-third of all Southland purchase loans last month, up from 2 percent a year earlier.
The data on mortgage payments was also interesting. The average mortgage payment for new October sales was $1,413. This is down 45% from the 2006 peak and, adjusted for inflation, 33.9% below the typical payments in early 1989.
California buyers are obviously seeing value in the current real estate market. If the pending government and major lender programs are successful in slowing the rate of foreclosures the market bottom is near.
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