Southern California Home Sales Hit 7-year High
By Gregory J. Wilcox, Staff Writer 06/11/2013
Buyers poured a record $4.65 billion in cash into Southern California's housing market during May, driving the biggest price gain in nine years and putting sales at a seven-year high, a research firm said Tuesday.
Last month, cash down payments and home purchases jumped 19.5 percent from $3.89 billion the year before and increased 1.8 percent from $4.57 million in April, the prior record, said La Jolla-based DataQuick.
The median price paid for all new and resale houses and condos in the six-county region increased 24.7 percent in May to $368,000 from $295,000 a year earlier and it was up 3.1 percent from $357,000 in April.
Last month's median was the highest for any month since May 2008, when it was $370,000, and the year-over-year increase was the largest since a 24.8 percent gain in October 2004.
"We're deep into uncharted territory: Amazingly low mortgage rates, a razor-thin inventory of homes for sale, and the release of years' worth of pent-up demand. Plus there's a seemingly endless stream of investors and non-investors who pay cash and thereby avoid the loan-qualification process. How this all plays out is educated guesswork at this point," John Walsh, DataQuick president, said in a statement.
"Understandably, speculation continues over whether another housing bubble is forming."
Price gains in the six county region ranged from 30.2 percent in Los Angeles County to 18.1 percent in Ventura County, DataQuick said.
The median price has now increased on a year-over-year basis for 14 consecutive months, with those annual gains ranging between 10.8 percent and 24.7 percent over the past 10 months. But May's median remained 27.1 percent below the record $505,000 median for the region in spring and summer of 2007.
Michael Carney, executive director of the Real Estate Research Council at California State Polytechnic University, Pomona, believes that prices will eventually level out with the peak of the last boom remaining a distant target.
"Those kind of increases can't be sustained, 20 to 30 percent are enormous increases," Carney said. "We're not going back to the earlier (record price) levels. Not in my lifetime."
Prices are heating up now because of near record low inventory and because housing again is an attractive investment.
"This has been going on for some time and it's largely people chasing yield," Carney said of the cash-flush market. "At this point, it's looking pretty profitable to invest in housing."
Most of last month's year-over-year gain in the median reflects rising home prices, while about a quarter of it reflects a change in market mix. Sales are increasing in more expensive markets and falling in low-cost areas, DataQuick said.
Lack of inventory continued to pinch sales in May.
Last month, sales across Southern California increased 3.8 percent to 23,034 properties from 22,192 a year earlier, DataQuick said. Last month's sales total was the highest for the month of May since 30,303 sold in May 2006.
In Los Angeles County, sales rose 2.8 percent to 7,707 from 7,496 a year ago. The median price increased to $410,000 from $315,000 in May 2012.
San Bernardino prices increase
San Bernardino County's median price increased 28.1 percent to $203,000 from $158,500 a year earlier. But sales slipped 1.7 percent to 2,655 from 2,702 a year ago.
The spiking prices will likely shake loose some inventory, said DataQuick analyst Andrew LePage.
"As prices continue to rise at this rate it's almost a given. You will see what economists call a supply response and an increase in inventory," he said.
In addition, the housing market continues to wean itself of distressed properties.
During May, foreclosure sales -- homes foreclosed in the prior 12 months -- accounted for 10.8 percent market share. That was down from 12.4 percent in April before and down from 26.9 percent a year earlier. Last month's foreclosure resale rate was the lowest since it hit 0 percent in August 2007. In the current cycle, foreclosure resale's hit a high of 56.7 percent in February 2009.
Short sales -- transactions where the sale price fell short of what was owed on the property -- had 17.7 percent share last month, unchanged from April but down from 24.3 percent a year earlier.
Absentee buyers -- mostly investors and some second-home purchasers "" bought 29.5 percent of the homes sold last month. That was down from 30.6 percent in April and up from 27.5 percent a year earlier.
The record was 32.4 percent in January this year.
The number of cases of flipping properties for a quick profit remained low last month.
During May, 5.9 percent of the homes sold had previously changed owners in the prior six months, down from 6 percent in April and up from 4.3 percent a year ago.
Kimberly Ritter-Martinez, an economist at the Kyser Center for Economic Research in Los Angeles who has been tracking the market since its collapse in the Great Recession, said the housing market is finally healing.
"It's safe to say we are in recovery. It's here and gaining momentum," she said. "But my forecast for home prices is a lot of uncertainty."