November 11, 2013
Southern California home prices appear to have hit a wall, with the median home price flat for the fourth consecutive month in October.
The median sale price was $383,750 last month, 21.8% higher than last year — but virtually unchanged from June, research firm DataQuick said Tuesday.
Home prices rose rapidly earlier this year as investors and families battled over a shortage of homes for sale, but buyers have pulled back, unwilling to stretch their budgets any further. Beyond affordability, several factors have helped ease price pressure, including rising mortgage rates, a pull-back by investors and an expanding supply of homes for sale.
"We have reached a plateau," said Esmael Adibi, director of Chapman University's A. Gary Anderson Center for Economic Research.
The share of absentee buyers — mostly investors — dropped in October. Those buyers purchased 26.5% of homes sold last month, compared with a record 32.4% in January.
Others see a more seasonal slowing as families put their home search on hold, not wanting to make a move with their children back in school and the holidays approaching.
"By no means are we flattening out," said Christopher Thornberg, founding partner at Beacon Economics. "There is way too much demand out there relative to supply."
Sales declined 4.4% from a year earlier to a total of 20,150 existing and newly built houses and condos. The measure is important to the economy because a sale usually spurs homeowners to spend on other items such as furniture.
The drop, however, owes largely to the rapidly shrinking supply of foreclosed homes for sale. Once distressed sales, which include short sales, are removed from the data, conventional sales skyrocketed 32% compared with a year ago.
"We are trending toward a healthy market," said Bill McBride, who writes the financial blog Calculated Risk.
Homes sold that had been foreclosed upon within the last year constituted 6.3% of existing home sales, down from 16.3% a year earlier and the lowest level since May 2007, DataQuick said. Short sales also fell, from 27.2% of the resale market last year to 12.9% in October.
The effect of the partial government shutdown on home sales remains unclear. A recent report from online real estate brokerage Redfin showed its agents nationwide saw tours and offers decline during the shutdown, which lasted 16 days in early October, but activity rebounded once the government reopened. Offers were actually up by the end of October compared with September, while tours were roughly flat, the report said.
Furthermore, many sales that closed in October were based on contracts signed earlier, before the shutdown started.
Sales fell on a year-over-year basis in all counties: Los Angeles, Orange, San Bernardino, Riverside, Ventura and San Diego. Across Southern California, sales rose 5.4% from September, when they plunged more than usual.
The plateau in the median home price — the point where half the homes sold for more and half for less — has eased concerns that the six-county Southland was becoming overheated.
"We are just not as busy with buyers," said real estate agent Anselm Clinard, who specializes mostly in Echo Park and Silver Lake.
Clinard has seen buyers get into homes for less than the asking price, as sellers continued to price their homes to the demand seen earlier this year.
Still, many homeowners remain priced out of the market by rapid increases earlier this year. And current sales remain tilted toward more expensive homes. The number of homes that sold in the typical move-up range — $300,000 to $800,000 — rose 15.5% over a year ago. Homes priced $800,000 and above jumped 32.9%.
By comparison, sales of homes costing less than $300,000 declined 32.2% compared with last October.
Sales of more affordable homes have declined for several reasons, putting a damper on the aspirations of many first-time buyers.
Investors, including Wall Street firms, have scooped up many of these lower-priced homes to flip or rent. Also, many owners in more-affordable areas still owe more on their mortgage than their house is worth, limiting their ability to sell and constraining supply, DataQuick said.
San Bernardino County, a hub for investors, saw the largest home price increase over the year, as prices jumped 35% to $229,550. In Los Angeles County, the median rose 24.6% from last year to $425,000 in October.
Those increases, Adibi said, were driven largely by investors rather than growth in employment or income.