February 17th, 2011 10:29 PM by Lehel S.
Southern California's housing market extended its slump as sales hit the lowest level for a January in three years and the median home price dropped year over year for the first time since fall 2009.
The price declines, which were steepest in the Inland Empire, were driven by a shift toward sales of cheaper properties and foreclosures as investors and all-cash buyers trolled the market. Real estate agents said many potential "retail shoppers" — those buyers who would like a home to live in — simply didn't qualify for a loan.
"Credit is too tight," said Michael Novak-Smith, a real estate agent in Moreno Valley who specializes in foreclosures. "You have a lot of people who want to buy houses, but they can't."
Economists warned that the months of January and February rarely set the pace for the rest of the year. Nevertheless, January's performance was an indication that the Southland's real estate market will remain hobbled as long as the labor market is weak.
"It is very hard to tell a trend from January, but I think we are experiencing a market that has not yet found its forward momentum," said Edward Leamer, director of the UCLAAnderson Forecast. "You can't have a healthy housing market without a healthy job market."
January sales fell to 14,458, down 5.9% from the same month a year earlier, according to San Diego research firm DataQuick Information Services. Sales declined 26% from the previous month, but such a drop from December to January is in line with historical averages, the company said.
The median price for all home types in the six-county region was $270,000, a 0.6% decline from January 2010, the first year-over-year drop since October 2009 and the lowest level since July 2009. Last month's median was a 6.9% drop from December's, a bigger drop than usual from December to January. The median price is the point where half the homes sold for more and half for less.
"Lots of potential buyers continue to hold back, waiting for a sign prices have bottomed, that their jobs are safe or that loans are easier to get," DataQuick President John Walsh said in a statement. "Meanwhile, plenty of potential sellers are waiting for a stronger market."
The figures released Tuesday represent sales that closed escrow in January, meaning many of the buyers were probably making their purchases during the typically sluggish holiday season late last year. Though the sales volume was the worst performance for a January since 2008, it was also far better than that reference point, when only 9,983 dwellings sold.
New-home sales, on the other hand, hit a record low, making January the worst for any month since DataQuick began keeping records in 1988. Major builders have faced fierce competition from previously owned homes. And an index of builder sentiment released separately Tuesday by the National Assn. of Homebuilders underscored their pessimism, with the gauge remaining unchanged for the fourth consecutive month at 16. (Any number above 50 indicates that more builders view sales conditions as good than poor.)
"While builders are starting to see more interest among potential home buyers, we are also dealing with a multitude of challenges, including competition from foreclosure properties and inaccurate appraisals of new homes, which are limiting our ability to sell," Bob Nielsen, chairman of the group, said in a statement.
On a regional basis, the West posted a 2-point decline to 13, the Midwest dropped 1 point to 12, the South increased 1 point to 18, and the Northeast was up 2 points to hit 22.
Cash was king in Southern California last month. Buyers who appear to have paid all cash accounted for a near-record of 29.5% of sales, paying a median $190,000, according to DataQuick. The peak for cash sales was 30.1% last February. Absentee buyers, those shoppers who are mostly investors and some second-home purchasers, bought a record 24.8% of homes last month, paying a median $198,500, DataQuick said.
Foreclosure sales accounted for 37% percent of the resale market last month, up from 35.1% in December but down from 42.1% in January 2010.
The number of loans insured by the Federal Housing Administration, a crucial source of financing for first-time buyers with little down-payment money, accounted for 33.2% of Southland mortgages last month, the lowest level since October 2008.
"There are literally 10 all-cash investors for every family that wants to buy a house," said Leo Nordine, a Los Angeles real estate agent who specializes in foreclosures. "There is a lot of money out there to buy, but not a lot of people who want to live in the houses buying."
Sales also shifted toward lower-priced properties in January. Last month, 82.3% of homes sold cost less than $500,000, a notable uptick from 79.2% of the market in December.