Issuu on Google+

San gabriel valley Market Overview

a monthly real estate report | July 09

Housing Sales Are Climbing With affordability reaching unprecedented levels nationwide, including Southern California, housing sales are climbing. The National Association of REALTORS® (NAR) reported the largest jump in pending sales in nearly eight years, largely due to the $8,000 tax credit stimulus for first-time home buyers ( w w w. p r u d e n t i a l c a l . c o m > B u y e r s > $8000 Tax Credit) Existing home sales increased 2.9%, reversing a downward trend in March. The median home price dropped 15.4% from a year ago to $170,200 – the secondlargest yearly price decline on record. The cause for the dramatic plunge is the rise of foreclosures and short sales, which impacted as many as 45% of homes sold. Distressed homes swelled inventories, driving them to 10.2 months on hand, up from 9.6 months on hand in March. Mortgage interest rates have hovered near or below 5% for benchmark fixedrate loans for as long as five months, as home buyers took advantage of a trifecta of opportunities: low interest rates, high inventories, and low prices. First-time home buyers now make up nearly 50% of the market, up from an average of 30%. Southern California Housing Outlook Improves Southern California first-time home buyers were joined by investors buying bargain-priced properties, and the sales pace increased for the tenth consecutive month, according to MDA DataQuick. The percentage of absentee owners in the market, which has stood at 15% since 2000, suddenly jumped to 18.6% in April 2009.

For the seventh month in a row, Southern California foreclosures accounted for more than 50% of sales, bringing the median sales price down from the first quarter of 2009. Foreclosure sales were notably higher inland than along the coast, and builders added little inventory due to heavy competition from distressed homes. Another weight putting downward pressure on the median sales price is low sales volume in the luxury ranges. Inventories of homes priced above $900,000 — out of conforming loan range — are at an 18-month high, while many communities have less than two months’ inventory of homes priced under $300,000. “Jumbo” mortgages – those above $417,000 — are harder to get. Although conforming loans can be obtained up to $730,000, the relatively high cost of living in Southern California meant that only 10.9% of homes sold in April were purchased with jumbo loans. Before August 2007, when the credit malaise began, nearly 40% of Southland sales were in the jumbo range. Nonetheless, overall home prices across California increased 1.4%. The median price rose to $256,700. Home buyers should be delighted that despite rising prices, homes are still priced 36% below 2008 levels, according to the California Association of REALTORS®. Prices are rising on volume of sales, which is up almost 50% for the same period. The takeaway: buyers may find declining prices in some price ranges and accelerating prices in others. Tax credit update With five months left on the federal tax credit for first-time home buyers, the credit is expected to continue fueling entry-level home sales.

Mortgage interest rates still a bargain Ideal home buying conditions don’t last for long. Currently, home buyers enjoy tax benefits, low prices, generous selections and low mortgage interest rates — but it’s inevitable that one or more of these conditions will change. Mortgage interest rates are already beginning to climb, reaching 5.6% for the week ending June 11, 2009. That’s still well below a year ago, when they averaged 6.32% — so current rates should be more than attractive to home buyers, particularly in view of lower home prices and greater selection. Home buyers who are concerned about rate increases would do well to look at Freddie Mac’s historical table on benchmark mortgage interest rates. Between 1972 and 2008, mortgage interest rates have seen an annual high of 16.63% with 2.2 points and an annual low of 5.83% with 0.6 points. (Discount points are the percentage of the loan the lender charges to provide a given rate.) From a historical perspective, there has not been a single year since 1972 when interest rates have been lower than they are right now. And a rise in interest rates can be negated by lower home prices. Here’s why: if interest rates rise 1/8th of a point, that translates to about $25 or less a month in monthly payments on a conforming loan, and $9,000 over the full term of a 30-year loan. But if a home buyer pays $9,000 less for a home, these higher interest costs are negated. For example, if home prices have sunk by 15% over the past year, home buyers are paying $15,000 less, or $85,000, for a $100,000 home. They’re paying $60,000 less, or $340,000, for a $400,000 home. That 1/8th point rise in interest rates is negligible compared to the opportunity to buy a home at a 15% discount. (continued)


This explains why mortgage interest rates and home prices don’t always rise or fall in tandem — and if they do, it’s not for long. As home buyers rush to take advantage of mortgage interest rates and other stimuli, lenders reach their capacity to provide loans, and interest rates inevitably rise.

Advice to home buyers: be ready to make your move by prequalifying with your lender. If interest rates move up before you’ve locked in your rate, make sure you still qualify. To lock in your rate, you must be preapproved, which means you’ve shared your financial information with your lender.

Advice to home sellers: price it right the first time. With first-time home buyers dominating the market, a home in move-in condition will always sell faster than one that needs updating. If you have a higher-priced home, your home has to be in better condition and better priced than your competition.

SAN GABRIEL VALLEY San Gabriel Valley housing is among the healthiest in Southern California. As of June 9, 2009, homes in all price ranges are in a blistering seller’s market. Only homes priced $900K and above have more than six months inventory on hand. At 7.2 months, that’s half the luxury range inventory of other communities in the region.

The following data refer to two types of homes. Detached homes have no shared walls. Attached homes have at least one shared wall, such as condos, duplexes, and high-rise apartments.

Detached Properties - Inventory in Months’ Supply

Detached home sales in the $900K range are fast approaching the blistering seller’s market of the more affordable homes.

Attached Properties - Inventory in Months’ Supply

Attached homes in the San Gabriel Valley are selling faster than those of any other region in Southern California.


Detached Listings Taken and Absorbed - 12 Months through May 2009 New Listings

2008/06

2008/07

2008/08

2008/09

Listings Absorbed

2008/10

2008/11

2008/12

More than twice as many detached homes were absorbed as introduced to the market in May 2009.

2009/01 2009/02

2009/03

2009/04

2009/05

Attached Listings Taken and Absorbed - 12 Months through May 2009 New Listings

2008/06

2008/07

2008/08

2008/09

Listings Absorbed

2008/10

2008/11

2008/12

2009/01

Absorption rates were also more than double that of new listings introduced to the market in May 2009.

2009/02

2009/03

2009/04 2009/05

Detached Listings Sold by Quarter - 12 Months through March 31, 2009

Average Sale Price

2007/1

2007/2

2007/3

2007/4

2008/1

2008/2

Listings Sold Units

2008/3

2008/4

One year sales trends don’t reflect the hotter sales of April and May brought about by lower prices between Q1-2008 and Q1-2009.

2009/1

Attached Listings Sold by Quarter - 12 Months through March 31, 2009 Average Sale Price

2008/06

2007/1

2008/07

2007/2

2008/08

2008/09

2007/3

2008/10

2007/4

2008/11

2008/12

2008/1

2009/01

2008/2

Listings Sold Units

2009/02

2009/03

2008/3

2009/04

Attached home sales were already rising year-over-year by Q1-2009 on 25.4% lower prices year-over-year.

2009/05

2008/4

2009/1


List Prices per Square foot by MLS Status - Detached Properties

Sellers should carefully consider buyer demand when pricing their home. When list prices per square foot of backup and pending properties is below that of active properties, sellers should review pricing with their agent.

List Prices per Square foot by MLS Status - Attached Properties

With over 3,400 sales associates in 58 offices across Southern California and the Central Coast,

Prudential California Realty is the name to trust when buying or selling a home. In 2008, our agents closed more than $12 billion in sales volume and well over 16,000 transactions. As one of the top five brokerages in the nation and the largest company in the Prudential Real Estate international network, we have the resources and connections to protect your interests and make sure your experience is a successful one. Prudential California Realty is proud to be a member of HomeServices of America Inc., a Berkshire Hathaway affiliate. For more information, visit your local Prudential California Realty office or www.prudentialcal.com.

Š2009 Prudential California Realty Independently owned and operated. Objective data used in this report provided by Real Data Strategies. Inc. An independently owned and operated member of the Prudential Real Estate Affiliates, Inc. This is not intended as a solicitation if your property is currently listed with another broker.


San Gabriel Valley Real Estate