Home prices fall in October as mortgage changes take hold
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Uncle Sam’s steps to exit the mortgage market took a toll on Southern California’s housing market in October as fewer higher-cost homes sold.
The median price, the point at which half the properties sold for more and half for less, dropped because sales of more expensive homes took a dive with government-backed financing for those homes scaling back last month.
CHART: Southern California home prices for October
The region’s median sale price was $270,000 in October, according to real estate market tracker DataQuick. That was the lowest since January, a 3.6% decline from September and a 4.6% drop from October 2010.
“For a few months now, lower prices and amazingly low mortgage rates have kept resale activity slightly ahead of last year,” John Walsh, DataQuick president, said in a statement. “Of course, that’s not saying a lot when you consider sales were 25% to 30% below average.”
With 16,829 new and previously owned homes sold, October’s sales pace was 29.3% below the average for that month going back to 1988, when DataQuick records start. Sales were down 7.3% from September and up 0.5% from October 2010.
One big change to the market last month was the federal government’s first step to reduce its role in the mortgage business by lowering the size of home loans it will guarantee.
The government currently supports about 90% of new mortgages — essentially propping up the home loan market after credit dried up and home sales plunged in the wake of the subprime mortgage crisis. The loan limit determines the maximum size of a mortgage that the Federal Housing Administration, Fannie Mae and Freddie Mac can buy or guarantee.
So-called nonconforming jumbo loans that are offered on the private mortgage market typically require bigger down payments and carry a higher interest rate, resulting in higher monthly payments for borrowers. In Los Angeles and Orange counties, the limit for FHA, Fannie and Freddie loans dropped from $729,750 to $625,500.
According to DataQuick, sales of properties in those two counties with loans between those limits fell 71% from the month before and 71.5% from a year earlier.
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-- Alejandro Lazo