Fire sale: SoCal home sales spike 65% as prices slide

Breaking news: Sales of existing homes in Southern California shot up 65% in September from year-ago levels, as prices continued their historic decline and bargain-hunters snapped up foreclosed houses, MDA DataQuick reported this morning. The research firm cautioned, however, that the September statistics do not reflect the impact of the financial crisis, which may weaken sales in coming months.

Median prices in the region fell to $308,500 in September, down 33% from year-ago levels. Prices fell $21,500 from August to September, a decline of about $1,000 every business day. Half of the houses sold in the region in September had recently been foreclosed on, MDA DataQuick reported.

"The pitifully low September 2007 sales numbers weren't tough to beat," said MDA DataQuick president John Walsh. "More impressive was that this September's sales volume bucked the seasonal norm and rose above August. Steep price declines, especially inland, have improved housing affordability quite a bit and may keep sales level swell above the record lows we saw late last year and early this year."

Walsh warned, however, that the market may have worsened in October: "You have to view last month's sales in the proper context," he said in a news release. "The represent escrow closings, which reflect purchase decisions made in mid-to-late summer. That was before the dramatic worsening of the nation's economic crisis in recent weeks. Over the next few weeks our sales data will begin to show how the meltdown in financial markets this fall has impacted housing demand."

The "fire sale" buying is strongest in the region's cheapest area, the Inland Empire, where prices are falling the fastest. In Riverside County, September sales were more than double year-ago levels, while median prices fell 37%, to $237,500; In neighboring San Bernardino County, sales spiked 88% from year-ago levels, whilc prices fell 37%, to $205,000.

Prices paid in Los Angeles County fell $20,000 from August, to $360,000 -- a decline of 31.4% from year-ago levels.

More to come.

--Peter Viles

Photo Credit: Bloomberg News.

Comments

[sandiegan]

The San Diego median price is now 4.55 x median household family income.

It was over 8 x median income at the height the bubble.

Median price to median rent for a 3bd apt is now somewhere between 11 x yearly rent and 14 yearly rent, depending on whose rent price numbers you use.

San Diego had a 33 x yearly rent high (as opposed to a 22 x yearly rent as an average for the last 15 years) according to Moody's site referenced in this blog earlier.

San Diego will be up, YOY, by next years DQ September numbers (reported in October, of course).

San Diego may see some M-O-M drops over the next twelve months, but the median price has bottomed.

I am so confident of this, that I would like to challenge the readers of this blog to a wager:

If the reported DQ September 2009 median price for San Diego is lower than $328,000, I will give $100 to a charity picked by Peter Viles.

If, however, the reported DQ September 2009 median price for San Diego is higher than $328,000, then you will give $100 to a charity picked by Peter Viles.

It will, of course, be strictly on the honor system.
Anyone who makes the wager will be left to their own honesty to pay up if they lose.

We can send checks or money orders to Peter to forward to the charity, and Peter can let us know how much was raised.

How about it?
We can state our positions, have some fun, and raise a few bucks for a worthy cause.

But, bet or no bet, the San Diego median home price (as reported by DQ news in October 2009 for September 2009 data) will be higher than September 2008.

[jeff morris]

Homeowners in LA, SB and Riverside should note that they have until November 30th to request a property tax reduction by filing a formal appeal "Request for Changed Assessment". And in each of these Counties, homeowners can also file an informal appeal with the Property Tax Assessor. Informal appeals are due by 11/30 in SB and Riverside while the informal appeal may be filed up to 12/31/08 in LA. All these Forms (Formal and Informal appeal forms) are available on the County web-sites but you will have to prepare by hand and find appropriate Comparable Sales. If you would like to save time and electronically file these forms with appropriate Comparables, then see http://www.californiaproptaxappeal.com/ where the process has been automated for $29.99. Keep in mind, if you pull your own Comparable Sales, that you should be using Comparable Sales no later than March 31st, 2008 so more recent declines in property value cannot be considered in your 2008 property tax appeal. Nevertheless, based on feedback from homeowners' even in cases where the Assessor has reduced property values, often these reductions did not fully reflect market conditions in Los Angeles, San Bernardino and Riverside and Property tax appeals should be considered before the due dates pass.

[dclogang]

"You have to view last month's sales in the proper context," he said in a news release. "The represent escrow closings, which reflect purchase decisions made in mid-to-late summer. That was before the dramatic worsening of hte nation's economic crisis in recent weeks."

I think sales this fall will be next to non-existent!!! Under $200,000 here we come. (like I've been saying all a long)

p.s. typo "the" nation's...

[Cal]

There were a lot of guidelines changes on October 1st that people were racing to get under the wire and beat. DPA and various MI changes were the biggest threats to future sales volumes. People will be blaming the stock market and the economy as the sales start dropping but I think it is more of the same story of credit tightening and seasonality.

That said every month remaining this year will beat its previous years counterpart, last years low sales volume in the 4Q won't be matched again.

[Tim K.]

I often hear about how "good areas aren't affected", and that house prices in areas like Arcadia, or South Pasadena will not go down.

However, I have in the last 2 months now witnessed first-hand people who were renting, one in Arcadia, the other in South Pasadena, who decided to move to Upland and Ontario, respectively, in order to buy a home for $220K and $235K - both at about $180-$200/sq ft.

These were both families who wanted to have the nice school district but felt they just couldn't wait and wanted to buy a house *now*. (I tried to convince them to wait, but alas, it is their money.)

So they went further east, and although it is a lot further for me to drive out to see them, and one of them now has a slightly longer commute (works in City of Industry), it seems to have been worth it for them.

The point of my long-winded story is that houses in "good areas" often *are* competition for houses in the inland empire. It appears, for example, that many who value South Pasadena think the reason it is so valuable is because if yo work westward, say in Santa Monica or downtown, it is much closer to commute. And that is true. But there are many people for whom the commute is in another direction. Granted, it may not be *as many*, but given the very slow volumes of home sales, IT'S ENOUGH TO AFFECT RECENT SALES.

And so a few more home buyers are removed from the pool, and the slow march down of home prices continues.

[OverIt]

I'll go out on a very short limb here and suggest that these sales are still being driven largely by speculators who will in turn contribute to an even steeper overall slide when it becomes apparent that their gamble was foolish and short sighted.

My guess is there will be a mind-boggling glut of inventory in early/mid '09, when the current foreclosure moratorium ends at the same time ALT-A resets begin to explode.

No amount of government intervention is going to stop this runaway train. Efforts to put a floor in prices may work for a very short time but it should be apparent pretty quickly that something will have to give and that something will have to be prices.

[tonylogan]

Sounds like there is no need for government intervention, since sales are up so much!

No one seems to be able to answer my question though, how many of these "sales" are actually just transfers back to the bank.

I see a lot of these foreclosures are not being bought by actual humans, but instead by lenders. This is establishing artificially high comps, since these are not real transactions.

Someone please let me know ifI am wrong here (or correct).

[mbob]

Who spiked the charts?

New regulations governing foreclosure have recently gone into effect.

Once those statutes work their way through the system, any cause for celebration should vaporize. And there's still an incomprehensible inventory of REO's that banks are desperate to keep from being marked to market.

Oh, and tell Sam that many LAT staffers--former and current-- agree that the paper's building is the whitest of elephants. It grew like Flopsy and Mopsy and really is not suited for any adaptive use. It's a lox, resale-wise. So that asset won't fetch much if a good-news-only policy takes effect.

A short tour around Auburn Hills, MI right now near the Daimler/Chrysler/Cerberus/Taxpayer/GM fortress of solitude will get you about the same response: involuntary loss of sphincter control by way of answer to the query "....what if they closed....."

[Angel]

Fake news, this article is just an ad for Real State agents, don't believe a word of it.

[Rational Renter]

Please stop using the term "fire sale prices". It is NAR spin. It is misleading at best and at worst reckless and dangerous. This is still bubble pricing. Buyers should not be convinced that they are getting a "deal" when Los Angeles homes still have 30-40% to fall. That's just more financial ruin waiting to happen.

[Laker]

sandiegan ,
MoM figures mean very little.
I don't know the area of San Diego so i really can't comment. (unlike some, if i don't know an area, i will sit quite)
I do know that in my general area of interest we are very far from that moment...

Also, rent to income or rent to mortgage payment should not be used when economy is hurting/credit is not available as it used to be during the bubble years.
Since people are actually losing their jobs, and some self employed have a job but no income...the only strong correlation is Income to price ratios.
Follow that figure, again without knowledge of the area, are San Diego prices not at 2001 levels???
Let me know

[Nick]

To sandiegan:

I'm sorry that I cannot take your wager; I would be happy to bet that the median price would decline further in the next year in the absence of government manipulation, but that seems foolhardy. The government has already allocated $800 billion explicitly to inflate housing prices, even not counting the couple trillion allocated in loans by the Fed to prop up otherwise failing banks. While I maintain that our government is largely incompetent and incapable of doing anything beneficial for the country with respect to the current economic problems, even I will concede that by printing enough money, they should be able to have success in preventing housing from becoming more affordable.

I'd love to be able to bet on the actions of the free market, but I'd also like to live in the US when it's not poised to elect a socialist and have the biggest expansion of government since they 1930's, but neither of those seems possible today.

[What is my next move?]

I am in the market and I cannot get financing. My adjusted gross income for the last two years was 80K and I have 100K cash with only $9000 owed on my car. No other debt at all. My wife and I both have a score of 680 and since I am self employed I cannot get financed. I could easily afford $4,000 to $5000 a month but if I am having this much trouble, I wonder if the tight lending will force the prices down even further. If I am in this boat are others in the same shape?

[E]

Yawn.

Call me when speculators aren't buying lower $ REO's to try to flip. That's where the "bounce" is coming from.

It wouldn't be so obvious if Redfin didn't have the past sales records listed.

[Cal]

SanDiegan,

I'll take the wager. Pete has my email.

[Rational Renter]

What is my next move - as an 80k/year earner, you cannot afford $4000 to $5000 a month. I am sorry, but that is the truth. Unless your wife has a substantial paycheck that you're not sharing with us. By traditional lending standards, you will not get a mortgage for more than a $400,000 house. Your $100k cash is great, however.

[Cal]

AGI is 80K and you can afford 4-5k a month PITI?

Something ain't adding up.

[waitingforgodot]

San Diegan,

I'm in. I assume Peter Viles has our e-mail addresses, or can access them. Even if I'm right, I have no problem cutting a check. I like people who do more than *just* opine.

[jbunniii]

"What is my next move" - I don't think you are telling us the whole story with regard to your financial history. Why, for example, is your credit score so low? 680 is subprime territory, indicating a history of untrustworthiness. That more than anything would explain why you can't find financing.

[I Live in L.A., Too!]

jbunniii,

I don't think that's quite fair. Subprime FICOs are more like 540-620. Then comes Alt-A. By 680, you've hit the low end of prime mortgages, I believe.

[Toby]

A year from now, you will hear the same thing over and over again....

"Where did I go wrong? I bought a foreclosure."

Yeah, but like all house purchases, if doesn't matter the price per say, it's the TIMING!

You buy houses at the wrong time, regardless of what you pay for it, you will lose money.

Period.

[desmo]

I would not take "Stupid diegan's" bet. He is right, in 9/2009 median prices will be up, but home prices will just keep falling. The least expensive homes are in foreclosure and selling now, by next year more expensive homes will be in foreclosure and selling then, 9/2009. Nice try. Would you like to bet on square foot prices diegan?

[dclogang]

"What is my next move" -680 credit score is kinda bad plus you owe almost $10k? hmm I wouldn't loan you money either.. especially in this economy.

Our score is 810 an we have ZERO debt. No car loans, no student loans and credit cards are paid off before any interest is charged and we actually make money (rewards credit cards..)

We looked into a home loan out of curiosity only in the spring and the lender was drooling over us. He also was trying to convince us that we could afford more than we can. (on a 30 year fixed) We said "oh, ok,we'll think about it." left the bank and didn't look back. We won't buy a house for a few years... that's fine because we just rented a house with a big back yard in a quiet neighborhood.

Why buy and pay property taxes, pay for maintenance, and blow your savings on a house that's losing value right now? It's insanity...pure insanity. (sorry real estate agents..It's the truth)

[Laker]

'What is my next move?' wrote: "...I cannot get financing. My adjusted gross income for the last two years was 80K....I could easily afford $4,000 to $5000 a month..."

'What is my next move?',
1st, 680 FICO today is subprime. True prime is 760 and above.
IF you can document 80K income, they will give you a loan of about $380K, provided you have no other debt. If you have 100K down, you can buy a $480K house. That is it.
If you have another 100K of undocumented income, that's good for you, but the bank will not give you a loan based on that.
However, if you tried that 2 years ago, you could have qualified for a 1 Million dollar loan with no problem....
Timing my friend is the essence...

[sandiegan]

Well, desmo,

Not sure what's up with your name-calling, but...

In 2005, the height of the run-up in San Diego, the median was inflated by lots and lots wacky loans to low-income borrowers who were buying ugly condos in the hood.

So now those are the ones being foreclosed and re-sold.

The high median in 2005 was skewed by these sales.
The low median in 2008 is being skewed by these sales.

The loans, the media coverage and all the bloviating online have all been infected by very fuzz math and pliable stats.

The DQ median was an imperfect measure in 2005.
It is an imperfect measure in 2008.
It will be an imperfect measure in 2009.

But pick a measure and make a stand.

If you don't want to bet, fine.

Either way, for whatever reason, the median in San Diego, as measured by DQ, will be up for next Septembers measurements.

That's for sure.