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SoCal Home Sales at 15-year
Low, Prices Edge Down

September, 2007

Home sales in Southern California dropped to their lowest level since 1992 as buyers, sellers and lenders held back in an environment of market uncertainty. Prices are off their peak, markedly so in lower cost neighborhoods, a real estate information service reported.

A total of 17,755 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 0.6 percent from 17,867 for the previous month, and down 36.3 percent from 27,857 for August last year, according to DataQuick Information Systems.

Last month's sales were the slowest for any August since 1992, when 16,379 homes sold, the lowest for any August in DataQuick's statistics, which go back to 1988. The strongest August was in 2003, when 39,562 homes sold. The August sales average is 28,160.

"It looks like we're pretty close to a 'floor' level of purchase activity right now. Market uncertainty has squeezed out most discretionary buying. Prices appear to be holding steady in expensive markets because potential sellers can wait the market out. That's not the case in more affordable areas where we're seeing price declines," said Marshall Prentice, DataQuick president.

The median price paid for a Southland home was $500,000 last month, down 1.0 percent from $505,000 in July, and up 2.7 percent from $487,000 for August last year.

When adjusted for shifts in market mix (i.e. fewer lower-cost homes selling now), year-over-year price changes went negative in January and are now 3.5 percent below year-ago levels.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The anticipated drop in financing with "jumbo" mortgages, home loans above $417,000, was barely noticeable. During the first half of August (through the 17th) 43.4 percent of the Southland's home loans were jumbo loans. That dropped to 39.7 percent for the rest of the month.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,421 last month, down from $2,447 the previous month, and up from $2,330 a year ago. Adjusted for inflation, current payments are 10.6 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 1.4 percent below the current cycle's peak one year ago.

Foreclosure resales accounted for 8.8 percent of August's sales activity, up from 8.3 percent in July, and up from 2.2 percent in August of last year. Foreclosure resales do not yet have a marketwide effect on prices, although foreclosure discounts appear to be emerging in some local Inland Empire and High Desert markets.

Other indicators of market distress continue to move in different directions. Financing with adjustable-rate mortgages is flat, financing with multiple mortgages has declined significantly. Down payment sizes are stable, flipping rates and non-owner occupied buying activity is flat, DataQuick reported.

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