Signs seen of a housing rebound in Southern California
By Alejandro Lazo
Original Post Date: April 14, 2010
Southern California’s housing market showed fresh signs of momentum in March with the median price and sales pace improving from the same month a year earlier as buyers hurried to take advantage of a soon-to-expire federal tax incentive, cheap prices and low interest rates.
The median price paid for new and previously occupied houses and condominiums in Southern California jumped 14% in March to $285,000 from the same month a year earlier, according to San Diego real estate research firm MDA DataQuick. The closely watched median — the price at which half the homes sold for more money and half for less — rose 3.6% from February.
In Orange County, the region’s priciest market, the median rose 12.2% to $432,000 as the number of foreclosure properties on the market sank and more homes in expensive neighborhoods were sold.
“There is no question that prices at the lower end of the market have stabilized and are showing some increases,” said Esmael Adibi, director of the Gary Anderson Center for Economic Research at Chapman University in Orange. “While this is welcome news, the word of caution is people should not really see this as the values of homes changing. It is mostly the mix we are seeing change” as sales pick up in more expensive areas.
Defaults have increased in higher-priced neighborhoods, motivating some sellers to put their homes on the market in those areas, DataQuick analyst Andrew LePage said.
The overall jump in the region’s median reflects a rebound from the depths of the financial crisis a year ago, when fears of another Great Depression abounded and a glut of foreclosed homes hit battered markets such as the Southland. Those fears have receded, fewer foreclosures were in the region’s sales mix last month, and more homes in higher-priced coastal markets were sold, contributing to the price jump.
“It’s almost like a boom-year figure,” said Ed Leamer, director of the UCLA Anderson Forecast. “But the numbers over the last several years have been influenced by the number of bank-owned properties, and the banks were selling their homes at rock-bottom prices.”
Southern California’s sales pace also improved last month from March 2009, up 5%, but not as robustly as usual for a March, DataQuick said. A total of 20,476 houses were sold in March, up from 19,506 sold in the same month a year earlier, but that was about 18% off the historical average.
Expectations remain mixed about housing’s future as a series of government initiatives to bolster sales and stabilize values expire. Experts also remain concerned about a potential wave of foreclosures despite the Obama administration’s efforts to keep struggling borrowers in their homes.
Foreclosure sales accounted for 38.4% of the Southern California resale market in March, down from 42.3% in February and 54.8% in March 2009. Foreclosures as a percentage of Orange County’s resale market stood at 22.7% in March, the lowest of any Southland county and the lowest percentage since January 2008.
“Right now the question is not whether the housing market is in recovery. The real question is how sustainable that recovery is, and that is where the gray area resides,” said Christopher Thornberg, principal of Beacon Economics. “The market is being driven by government policy and not by fundamentals, and now the government is starting to back off.”
Last month the Federal Reserve ended its $1.25-trillion mortgage-bond-purchase program, and many economists expect interest rates to begin to rise as a result. The program, which has kept interest rates at rock-bottom levels, helped the Fed buy nearly all the mortgage bonds from housing finance giants Fannie Mae and Freddie Mac, replacing most private investors.
Also, the Federal Housing Administration, which has stepped up its support of low-interest mortgages for first-time buyers, has tightened its lending standards.
At the end of this month, a federal tax-credit program for first-time buyers and for some current homeowners is scheduled to expire. The program provides as much as $8,000 to first-time buyers and as much as $6,500 to current homeowners.
Last month California lawmakers decided to add to the stimulus package and approved a credit of up to $10,000 for first-time home buyers and those buying newly built homes. The credit will take effect May 1.
Haydee Cuervo, 33, and her husband, Yuri, 34, are hoping to take advantage of those tax credits as they sell their home in Arleta and close on a property in Granada Hills. They bought their Arleta home in 2001 and have built equity despite the decline in home prices. With two daughters, ages 6 and 3, Haydee Cuervo said it was time to look for a house with a bigger backyard and on a quieter street.
“We want a big treehouse and a play area, and the place that we found has a really cool private backyard,” Cuervo said. “The new house was not only a better location for us, but it was kind of what we wanted for our girls.”