La Jolla, CA. – June 15, 2011 – (RealEstateRama) — The Bay Area housing market in May posted modest month-to-month gains in sales and median prices, but those same measures fell sharply from year-ago levels, which had been pumped up artificially by homebuyer tax credits. Move-up buying and new-home sales were especially weak last month, while the share of sales involving distressed properties, cash buyers and investors remained far above normal, a real estate information service reported.
A total of 6,988 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 2.9 percent from 6,789 in April but down 15.4 percent from 8,264 in May 2010, according to San Diego-based DataQuick. Last month’s year-over-year drop was the sharpest since sales fell 22.8 percent last October.
On average, Bay Area sales have risen 6.6 percent – about double last month’s gain – between April and May since 1988, when DataQuick’s statistics begin.
Last month’s sales were the lowest for the month of May since 2008, when 6,216 homes sold, and the third-lowest on record, behind May 1995 and 2008. May sales have ranged from a low of 6,216 in 2008 to a high of 13,567 in 2004, while the average is 9,693. Last month’s sales fell 27.9 percent below the May average.
Builders sold 370 newly built homes last month in the Bay Area, down 47.1 percent from a year earlier and the lowest number for a May since at least 1988. Builders have struggled with the weak economy and competition from the resale market, especially distressed properties.
“Given the sluggish start to this spring’s home-buying season, with sales 20 to 30 percent below average, it’s no surprise we’re logging sharper declines from 2010. Sales got a big shot in the arm a year ago, when people rushed to take advantage of expiring homebuyer tax credits. Today the market must stand on its own, and it’s having a hard time doing that in the absence of stronger job growth and consumer confidence. So far, low mortgage rates and lower home prices aren’t enough to overcome the concern some potential buyers have that prices could fall more. Other would-be buyers are unemployed or underemployed, or can’t qualify for a loan. Scores of would-be move-up buyers owe more than their homes are worth; so they’re stuck,” said John Walsh, DataQuick president.
“There are always bright spots and exceptions within a large regional housing market,” he added. “But there wasn’t much in the latest sales data to suggest the overall market will pull out of this rut anytime soon. History suggests that, after a sharp downturn, the market could be stuck in that rut for quite a while, perhaps years. Eventually it will pull out, of course, as hiring accelerates, consumers feel more confident, and, we assume, credit flows at least a bit more easily. When rents start rising that will nudge more people into buying, too.”
The median price paid for all new and resale houses and condos sold in the Bay Area last month was $372,000, up 3.3 percent from April but down 9.3 percent from $410,000 in May 2010. It was the largest year-over-year drop in the median since August 2009, when it fell 19.5 percent from a year earlier, to $360,000.
The median has fallen year-over-year for eight consecutive months, following 12 months of annual gains. The median peaked at $665,000 in June/July 2007 and dropped to a low of $290,000 in March 2009. Around half of the peak-to-trough drop was the result of a decline in home values, while the other half was a shift in the sales mix toward lower-cost homes, especially foreclosures.
Distressed home sales made up about 45 percent of the Bay Area’s resale market last month.
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 26.9 percent of resales in May. Last month’s figure was down slightly from 27.9 percent in April and up from 26.7 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 15 years is about 9 percent.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 18.3 percent of Bay Area resales last month. That was up from an estimated 17.5 percent in April, 18.2 percent a year earlier, and 12.5 percent two years ago.
For the overall market, sales fell across virtually all price categories last month compared with a year earlier. But in percentage terms, sales in the lower and higher price ranges held up best: Transactions below $300,000 made up 38.7 percent of last month’s deals, up from 30.9 percent a year earlier. Sales of homes priced at $800,000 or more made up 15.9 percent of last month’s total sales, about the same as a year ago, when they represented 15.8 percent of sales.
But the share of sales between $400,000 and $800,000 – a range in which many move-up transactions occur – fell to 30.7 percent of all deals last month, down from 37.6 percent a year earlier. Last year the federal homebuyer tax credit helped fuel move-up activity – an incentive that no longer exists. Moreover, many of today’s potential move-up buyers owe more on their homes than they are worth and are unable to “move up” to a more expensive abode.
Last month 35.8 percent of Bay Area sales were for $500,000 or more, up a tad from 35.4 percent in April but down from 40.7 percent in May 2010. The all-time low was January 2009, when just 22.7 percent of sales crossed the $500,000 threshold. Over the past 10 years, a monthly average of 47.1 percent of homes sold for $500,000-plus.
However, an alternative method of tracking activity in higher-end areas suggests that those neighborhoods now account for a fairly normal level of sales relative to overall regional activity.
Sales in zip codes representing the top one-third of the market, based on historical prices, accounted for 37.5 percent of all sales in May. That was up from 36.3 percent in April and down from 38.3 percent a year ago, but basically in line with the 10-year monthly average of about 36 percent. Those higher-end areas’ contribution to regional sales had dropped to as low as 18.0 percent in January 2009, while their peak market share was 44.7 percent of sales in July 2007.
Government-insured FHA loans, a popular choice among first-time buyers, accounted for 28.4 percent of all home purchase mortgages in May. That was down from 29.9 percent in April and up from 24.4 percent a year earlier.
While sales of higher-cost homes continue to suffer from the credit crunch that struck in August 2007, one indicator of mortgage availability continued to improve slightly. In May, 16.1 percent of the Bay Area’s home purchase loans were adjustable-rate mortgages, the highest portion since 20.7 percent in August 2008. Last month’s figure was up from 15.5 percent in April and 13.2 percent a year earlier. ARMs are nothing unusual in the Bay Area, where the average monthly ARM rate over the last 10 years is 46
percent. ARMs hit a low of 3.0 percent in January 2009.
Buyers using ARMs last month paid a median $650,000 for their homes, with a median purchase loan of $417,000.
Jumbo loans, mortgages above the old conforming limit of $417,000, remain relatively hard to get but accounted for 32.4 percent of last month’s purchase lending, up from 32.2 percent in April but down from 35.0 percent a year ago. The post-housing-boom low was 17.1 percent in January 2009. Before the credit crunch struck in August 2007, jumbos accounted for nearly 60 percent of the Bay Area purchase loan market.
Last month absentee buyers – mostly investors – purchased 21.9 percent of all Bay Area homes sold, up from 21.1 percent in April and 14.8 percent a year ago. The peak was 23.4 percent in February this year, while the monthly average since 2000 is 13.7 percent. Absentee buyers paid a median $244,000 in May.
Buyers who appeared to have paid all cash – meaning no corresponding purchase loan was found in the public record – accounted for 27.9 percent of sales in May, up from 27.4 percent in April and 21.4 percent a year ago. The record was 30.5 percent this February, while the monthly average is 11.8 percent since 1988. Cash buyers paid a median $245,000 in May.
San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Because of late data availability, sales were estimated in Alameda and San Mateo counties.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $1,533, up 1.0 percent from $1,518 in April and down from $1,739 a year ago. Adjusted for inflation, last month’s payment was 44.0 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 58.6 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but below peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above average, DataQuick reported.
Sales Volume Median Price
All homes May10 May11 %Chng May10 May11 %Chng
Alameda 1,596 1,349 -15.50% $390,000 $348,000 -10.80%
Contra Costa 1,704 1,483 -13.00% $293,750 $255,000 -13.20%
Marin 264 227 -14.00% $675,500 $640,000 -5.30%
Napa 127 122 -3.90% $350,000 $340,000 -2.90%
Santa Clara 2,164 1,654 -23.60% $525,000 $498,000 -5.10%
San Francisco 616 492 -20.10% $636,500 $660,000 3.70%
San Mateo 640 599 -6.40% $605,000 $573,000 -5.30%
Solano 652 602 -7.70% $219,000 $189,000 -13.70%
Sonoma 501 460 -8.20% $335,000 $313,500 -6.40%
Bay Area 8,264 6,988 -15.40% $410,000 $372,000 -9.30%
Source: DataQuick, www.DQNews.com
Media calls: Andrew LePage (916) 456-7157