California January 2009 Home Sales

An estimated 29,458 new and resale houses and condos were sold in California last month. That was down 22.1 percent from 37,836 in December and up 53.9 percent from 19,145 in January 2008. Sales have increased on a year-over-year basis for the last seven months. California sales for the month of January have varied from last year's low of 19,145 to a high of 47,138 in 2004, while the average is 30,837. MDA DataQuick's statistics go back to 1988.

The median price paid for a home last month was $224,000, down 10 percent from $249,000 for the month before, and down 41.5 percent from $383,000 in January a year ago. Around half the drop in median is due to price depreciation, the other half due to shifts in the types of homes selling, and how those homes are financed. Last month's median was the lowest since it was $220,000 in May 2001.

Of the existing homes sold last month, 60.4 percent had been foreclosed on in the prior 12 months. A year ago it was 29.6 percent.

The typical mortgage payment that home buyers committed themselves to paying last month was $969. That was down from $1,110 in December, and down from $1,790 in January last year. Adjusted for inflation, mortgage payments are 54.5 percent below the spring 1989 peak of the prior real estate cycle. They are 62.0 percent below the current cycle's peak in June 2006.

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

Indicators of market distress continue to move in different directions. Foreclosure activity waned in the fall but edged higher in December and remains near record levels, while financing with adjustable-rate mortgages is at an all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity has edged a bit higher, MDA DataQuick reported.

Importance of community elements

Community elements essential to supporting favorable home prices over the long haul

With lower home prices and attractive mortgage rates, 2009 will present plenty of bargains for real estate shoppers. But as the historic bust continues, Americans everywhere are learning a painful lesson about home buying: property values don't always increase. As such, anyone looking to purchase a home this year should make sure they're buying into a community that can support long-term value. With the help of housing experts, U.S. News compiled a list of the top 6 ingredients of strong housing markets:

Please note that although the following factors will help support a home's value over the long term, they can't prevent short-term declines in a given market—especially in light of the ongoing real estate crash. "These would be forces that are going to impact [your home] over the next five to ten years, as opposed to next year," says Mike Larson of Weiss Research.

1. A well-groomed neighborhood: Well-maintained homes and landscaping have a positive effect on property values in that community, says Joshua Dorkin, founder and CEO of BiggerPockets.com, a real estate networking and information site. By caring for the appearance of their homes, residents help to create a more aesthetically-pleasing environment that future real-estate hunters will want to buy into. So when you're eyeing a home, make sure to take a drive through the entire neighborhood. Take note of how the neighbors care for their homes, lawns and gardens. "Run-down houses and abandoned cars are big red flags," Dorkin says.

2. Good schools: Given the importance of education, communities located within strong school districts tend to support higher home prices. Parents, after all, will want to move into the communities with the best educational opportunities. "The school district is important in terms of increasing demand for that particular area," says Richard Moody, chief economist at Mission Residential. Would-be home buyers can determine the strength of a local school system by accessing online information from local governments or community websites, Moody says.

3. Low Crime: Low crime rates also support strong home values. Since nobody wants to live in a neighborhood where they feel unsafe, crime limits housing demand in a given community. As a result, it's important to obtain crime statistics for the neighborhood you're considering moving into. The best way to do that, says Steve Dexter, a foreclosure expert and author of the book Beat the Banks, is to contact the local police department. "The police department is a public utility," Dexter says. "Most medium- to large-sized [communities] have a public information [officer] that is dedicated to interacting with the public." By contacting this office, home shoppers can get their hands on all the information they'll need to determine a community's level of safety.

4. Close to public transportation: Proximity to public transportation or commuter rails can also help boost home values, says Ron Phipps, a broker with Phipps Realty in Warwick, R.I. He argues that Americans are increasingly willing to pay a premium for properties that allow them to be less dependent on cars. "Access to bus lines and commuter rail lines is of huge value," Phipps says. "The price of fuel is going to go up again and a lot of my clients are saying, 'O.K., how do we position ourselves to minimize that impact?'" Phipps says.

5. Favorable population trends: It's also important to look at the population trends in the city you're considering moving to, Moody says. "You want to see a track record of steady population growth, which supports growing demand for housing, which will in turn support rising home values," Moody says. Such data can be found online at the U.S. Census Bureau, or though local county or township web sites, he says.

6. Healthy employment landscape: Employment plays a key role in population trends, as workers migrate to locations where they can find jobs. Thus, a healthy employment outlook is a key component of a strong housing market. "If you are in one of these upper Midwest cities and you've got layoffs, especially in a sector like automotives where the jobs are disappearing and they are not coming back, that is a huge problem," Larson says. Home shoppers can obtain economic data from the local government or chamber of commerce, Larson says. Pay special attention to the unemployment trends and find out if any new companies are slated to move into—or out of—the area. "A lot of communities have been trying to attract the sort of economically insensitive industries like biotech and [pharmaceutical companies]," Larson says. "If you've got an area where that kind of business is being brought in—through tax incentives or other efforts—that would be a positive for your local area."

The Top 5 Housing-Market Hopes for 2009

Here are the five best reasons to be hopeful about housing in 2009:

1. Cheap mortgage rates: With inflationary pressures easing and economic concerns mounting, shell-shocked investors are seeking the protection of government securities, such as 10-year treasury notes, driving down yields. The lower yields, coupled with the Fed's recently announced plans to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac have dragged mortgage rates to multi-year lows. Thirty-year, fixed mortgage rates hit an average of 5.47 percent last week, the lowest they've been since 2004, according to Freddie Mac.

To be sure, not everyone will be able to take advantage of these attractive rates: Tougher lending standards will prevent many would-be buyers from getting into the market, while homeowners whose houses are now worth less than what they owe on their mortgage won't be able to refinance. Still, the rates present a welcome incentive for qualified borrowers to step up to the plate. "Lower mortgage rates mean more people with those credentials will be able to qualify," says Patrick Newport, a U.S. economist at IHS Global Insight. While that might not make a dramatic impact on the market, it could be enough to keep home sales from declining as much as they otherwise would, Newport says.

2. Lower prices: Home prices at the national level have already fallen 21 percent from their 2006 peaks. And in certain bubble markets, the crash has been even steeper-prices have fallen more than 30 percent in Phoenix and Las Vegas over the past year alone. Although that's a big blow to homeowners-the housing bust is expected to wipe out more than $2 trillion in home values in 2008-lower prices do help stimulate buyer demand, which is badly needed to mop up the excess housing inventory. And while home prices are expected to drop further in 2009, values in certain markets are already at levels low enough to tempt bargain hunters. "Falling home prices aren't part of the problem, they are part of the solution," says Mike Larson, a real estate analyst at Weiss Research.

3. Fewer housing starts: In the face of dwindling demand, home builders have been forced to sharply pull back on new construction. The government reported Tuesday that November housing starts dropped to their lowest level since 1959, when officials started keeping the statistics. While that's bad news for the economy-because it means fewer jobs for builders and others-it's an important step in bringing housing supply back in line with demand. The cutback will limit the supply of new homes coming into the market, which helps to reduce the glut of unsold homes that is putting such downward pressure on housing prices. "In order to get rid of the inventory, builders have to cut back even further and prices have to drop," Newport says. "It's very painful, but there is no way to get around the fact that that's what you need to do to equilibrate the market."

4. Obama stimulus: In an attempt to hoist the economy out of its rut, President-elect Barack Obama has announced plans for a massive federal spending program. The initiative is expected to put between $500 billion and $1 trillion into infrastructure repair and other projects in an effort to keep Americans working. Should this program succeed in preventing unemployment from skyrocketing and keeping the economic contraction from hitting the dourest projections, certain housing markets may firm up quicker than expected, says Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School of Business. In the best-case scenario, "the housing market declines become contained to those markets where house price declines are significant," Wachter says.

5. Credit programs: It will be tough for the housing market to come back to life until the credit markets-which have been log-jammed by fear for more than a year-begin to unlock. Like the fight to limit unemployment, reviving the credit markets is a daunting challenge. But remember, the federal government has already taken a number of steps designed to do just that. The Federal Reserve has slashed its benchmark interest rate to between 0 and 0.25 percent and committed nearly $2 trillion to new lending programs, bailouts, and additional measures designed to bolster the financial markets. Meanwhile, Congress passed a $700 billion bailout and the Treasury has already injected a chunk of that money into banks of all sorts. While these efforts haven't been enough to restore the credit markets to health, they have produced results. Interbank lending, for example, has eased. And should this modest victory lead to a broader recovery in the credit markets, the economy-and the housing demand that comes with growth-could turn around quicker than expected. "Right now, panic is driving the credit markets," says Moody of Mission Residential. "If, for whatever reason, confidence were to resume and people's appetite for risk was starting to increase, then you could start all of a sudden seeing credit flowing much more freely, which obviously supports spending in both business and households."

Top 5 home-buying blunders for 2009

With cheaper home prices, lower mortgage rates and big discounts on foreclosures, buyers will have plenty of incentives to get into the real estate market in 2009.

But anyone considering buying a house next year should proceed with caution. After all, a gloomy outlook for home prices, the ongoing financial crisis and a potentially historic recession create a number of potential pitfalls.

* Talk back: Will home prices keep falling in 2009?

To help you navigate an uncertain market, we've compiled a list of leading home-buying mistakes for 2009, based on conversations with real-estate professionals.
1. Buying for the short term
With home prices at the national level expected to continue declining throughout most of next year at least, 2009 won't be a good time to try to turn a quick buck in the real-estate market.

Many homes purchased in 2009 will lose value in the short term. And although they are likely to recover that value when the market rebounds, it remains unclear just when home prices will bounce back.

"If you're not planning on living in that house for more than three to five years, I wouldn't buy anything right now," says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. "Nobody knows what is going to happen to prices over the next few years."

So if you're going to buy real estate in 2009, you're better off buying a home that you plan to live in for a long time, rather than a short-term investment property.
2. Not understanding your local market
Although it's easy to get caught up in the gloomy national housing trends, prospective homebuyers should be paying more attention to what's going on in the market where they are considering purchasing property. After all, home prices in your market could be moving in the direction opposite to the rest of the country.

"Individual markets are not the national market," says Keith Gumbinger of HSH Associates. "(The real estate market) is tremendously individualized."
More from MSN Money and U.S. News & World Report
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* How to lowball a home seller
* 5 housing market hopes for 2009
* 5 keys to finding housing bargains
* Mortgage rates in 2009: 7 things to know
* Survival strategies for home sellers
* The 15 best small businesses to start in 2009

3. Not scouring for deals
Prospective homebuyers can obtain a solid understanding of conditions in their market by talking to a real-estate professional, reading the local newspaper's real-estate section or finding a good housing blog that covers the area.

With the fall in home prices expected to persist, 2009 will be a buyer's market. As such, people considering a home purchase should understand that they are in the driver's seat and be on the lookout for deals.

"It's definitely a buyer's market," says Mark Hanson, a managing director who handles real estate and finance research for the Field Check Group. "Look for deals; go in there and lowball; look at foreclosures."

But while haggling is healthy, be careful not to go overboard. Buyers who make insultingly low offers are likely to be considered "bottom feeders" and dismissed by sellers, Gumbinger says.
Video on MSN Money
home-buying blunders © Ingram Publishing/Jupiterimages
Look out below
Home prices in October dropped by the sharpest annual rate on record and there's no sign the pain is over, according to the Standard & Poor's/Case-Shiller 20-city housing index, which fell by 18% from a year earlier. (Dec. 30)
4. Purchasing a foreclosure just because it's cheap
While foreclosures can offer homebuyers big discounts, such properties sometimes come with a great deal of baggage.

For example, the previous owners could have left the home in poor condition, requiring thousands of dollars of repairs, says Joshua Dorkin, the founder and CEO of BiggerPockets.com, a real-estate networking and information site.

"A pitfall for 2009 would be buying a foreclosure without knowing what you are getting into," Dorkin says. "Because that great deal may not be so good if you get inside and you find out that the floors are ripped up and the walls are destroyed."

* MSN Real Estate: 10 questions for first-time homebuyers

Before you decide to go foreclosed-home shopping, do your homework or contact a real estate professional with experience with such transactions.
5. Overly aggressive buying
Even if you've found the perfect property, make sure it is something you can reasonably afford.

Many economists expect the current recession to be the nastiest in decades, with some projecting the unemployment rate to hit 9%. That means that 2009 won't be a good year to try to stretch your finances.

"Just because a lender says you qualify for this much of a loan doesn't mean you should buy that much of a house, especially if that is 50% of your take-home pay," Hanson says. "What happens if you lose your job? We're going into a period of heavier unemployment, so buy conservatively."

Southland October home sales climb to highest level of the year

Southern California home sales rose unseasonably last month from September as buyers shook off gloomy financial news and took advantage of often-steep discounts. The median sale price fell to $300,000 - a 67-month low - as foreclosures once again accounted for half of all resales, a real estate information service reported.

A total of 21,532 new and resale houses and condos closed escrow in the six-county Southland in October - the highest for any month this year. Last month's sales rose 5.0 percent from 20,497 in September and jumped a record 66.7 percent from 12,913 in October 2007, according to San Diego-based MDA DataQuick, a real estate information service.

Fueled by lower prices, Southland sales have risen on a year-over-year basis for four consecutive months, breaking a 33-month streak of annual declines.

October home sales dropped below September's in 11 of the past 20 years, when the change between the two months averaged -1.2 percent. October has never been the peak month for sales in any year back to 1988, when DataQuick's statistics begin.

"You could easily imagine a meaningful decline in sales last month, given the seasonal norm and the dire financial news that potential buyers had to ponder in September. But we have yet to see any big, sudden drop in the number of transactions closing escrow. It tells us there were a lot of very serious buyers in the market during late summer and early fall - buyers who consider housing a relatively good buy or investment," said John Walsh, DataQuick president.

He added: "Whether the worst of the housing correction is behind us will depend largely on the depths of this economic downturn, especially with regard to job losses. Also important will be the outcome of recently announced efforts to reverse the tide of foreclosures."

October's home sales total was the highest in 20 months but was still the second-lowest for an October since 1996. Last month's sales were 12.4 percent lower than the 21-year average for October sales.

Last month's record annual sales increase reflects two things: Very weak sales a year ago on the heels of the August credit crunch and earlier subprime meltdown, and this year's big sales gains in inland markets where prices have fallen 30 percent or more. Depreciation in such areas has triggered record foreclosures, which tend to sell at a discount, attracting bargain hunters.

Fifty-one percent of existing homes that closed escrow in October were foreclosed on at some point in the prior 12 months. That's up from a revised 50.0 percent in September and 16.0 percent in October 2007.

At the county level, these "foreclosure resales" ranged from 39.2 percent of October existing home sales in Orange County to 67.7 percent in Riverside County. In Los Angeles County foreclosure resales were 40.3 percent of sales; in San Diego 48.6 percent; San Bernardino 65.2 percent and in Ventura County 47.0 percent.

High foreclosure resale levels help explain the Southland's $300,000 median sale price in October, the lowest since it was $298,000 in April 2003. Last month's median was 2.8 percent lower than $308,500 in September and 32.6 percent lower than $445,000 in October 2007. The October median stood 40.6 percent below the peak $505,000 median reached in spring and summer of last year.

Several factors explain the plunge in the median price, the point where half of the homes sold for less and half for more: Regionwide home price depreciation; much slower high-end sales; and the rising market share of foreclosure resales, which tend to be located in mid-to lower-cost areas.

Many of the region's relatively affordable neighborhoods saw October sales more than double from a year ago. Use of FHA-insured loans allowing a down payment of as little as 3 percent represented nearly one-third of all Southland purchase loans last month, up from 2 percent a year earlier.

Meanwhile, use of larger mortgages known as "jumbo loans," common in higher-cost coastal neighborhoods, is still far below normal. Before the credit crunch hit in August 2007, 40 percent of Southland sales were financed with jumbos, then defined as over $417,000. Last month just 13.1 percent of purchase loans were over $417,000.

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

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,413 last month, down from $1,458 the previous month, and down from $2,115 a year ago. Adjusted for inflation, current payments are 33.9 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 45.8 percent below the current cycle's peak in June 2006.

Indicators of market distress continue to move in different directions. Foreclosure activity is at or near record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat but might be emerging, MDA DataQuick reported.

Mortgage Rates Falling

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.14 percent with an average 0.7 point for the week ending November 13, 2008, down from last week when it averaged 6.20 percent. Last year at this time, the 30-year FRM averaged 6.24 percent.

The 15-year FRM this week averaged 5.81 percent with an average 0.7 point, down from last week when it averaged 5.88 percent. A year ago at this time, the 15-year FRM averaged 5.88 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.98 percent this week, with an average 0.6 point, down from last week when it averaged 6.19 percent. A year ago, the 5-year ARM averaged 5.96 percent.

One-year Treasury-indexed ARMs averaged 5.33 percent this week with an average 0.5 point, up from last week when it averaged 5.25 percent. At this time last year, the 1-year ARM averaged 5.50 percent.

"Long-term mortgage rates fell slightly this week as signs the overall economy is weakening brought interest rates down market-wide," said Frank Nothaft, Freddie Mac vice president and chief economist. "In addition, the actions of the Fed in recent weeks to assist commercial paper markets appear to be thawing part of the credit freeze that has gripped capital markets in the U.S., giving banks some breathing room. This is the second week that rates have come down for fixed-rate mortgages."

"Mortgage applications for home purchase loans fell during the final week in October to the slowest pace since the week of December 29, 2000, based on figures published by the Mortgage Bankers association. Meanwhile, the National Association of Realtors® (NAR) reported that pending existing home sales fell 4.6 percent in September, below the market consensus; however, the index was 1.6 percent above that of the same period last year." Today's Local Market Conditions Report

Turnaround in the Real Estate Market?

California Leads the Way in Hot Markets

The real estate conditions are right in California -- falling prices, pent up demand, low interest rates -- to bring about a perfect storm of real estate sales, creating a hot market statewide. While some prognosticators tout the woes of price drops of up to 50 percent, buyers are seeing the devaluation as a signal to get off the fence. And they are doing just that with a vengeance.

Statewide, homebuyers purchased at an annual rate of nearly 490,000 homes in July -- up 43 percent from a year ago. July marked the third consecutive month for home sales to top the 400,000 mark, according to California Association of Realtors President William Brown.

"Year-to-year increases in the number of transactions ranged from a 6.7 percent increase in the San Francisco Bay Area to a 176.5 percent increase in the Riverside/San Bernardino region," he says on the trade group's web site. "In general, greater percentage gains occurred in lower-priced areas that had been most adversely affected by the market downturn since late 2005 and that are concurrently experiencing the biggest declines in prices."

The inventory of homes in California continues to drop from last year's levels as well. For the month of July, there is a 6.7 month's supply compared to last July's 10 month supply of homes.