Home Buyers in Southern California Ignore Bad Financial News

October home sales data is starting to come in for the California markets and the positive trends are continuing. I had read several articles predicting that home sale would stall as buyers' fear was incited by the stock market crash.

Southland home sales up, prices down; foreclosures now half the market.

Southern California home buyers did not slow down as the 6 county region had October sales 5% higher than September, 66% higher than October 2007, the highest monthly sales this year and the highest monthly sales in 20 months. Buyers were taking advantage of low prices on foreclosed homes as over half of the sales were these type of properties.

An interesting fact in the report shows there is plenty of room for sales growth. Although the October sales number was the 4th straight month of year over year increases (after 33 months of decreases) the October sales number was still 12% below the 21 year average for October.

The median home price for the region fell to $300,000. I think a couple of excerpts from the Data Quick report explain it best:

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.

The data on mortgage payments was also interesting. The average mortgage payment for new October sales was $1,413. This is down 45% from the 2006 peak and, adjusted for inflation, 33.9% below the typical payments in early 1989.

California buyers are obviously seeing value in the current real estate market. If the pending government and major lender programs are successful in slowing the rate of foreclosures, the market bottom is near.

Disclosure: None

Comments

[sbrunton1956:]

Uptick rule NOW...

2008 Nov 21 02:02 AM

[sstro:]

Something else is driving these numbers. People with a lot of money are buying vacant homes to resell rather then invest in the market. That's just my opinion. I also don't trust that anyone only putting down 3% on a medium price house of 300k is a good risk. I doubt we have seen the bottom yet I know there are still a bunch of bad loans out there waiting for their time to explode.

2008 Nov 21 08:24 AM

[Still Renting:]

There are dead cat bounces in real estate too. California IS on the bleeding edge so it is possible that when it comes back it will come back there first. We'll see how this works for these new buyers when the economy REALLY tanks next year.

I am extremely interested in seeing the post-Thanksgiving retail numbers this year.

2008 Nov 21 10:21 AM

[vineet:]

I know a person who bought a condo for 160k in May/June 2008 that was peaked at 210k. The person was elated at the price and prospect of renting it out. Dead Cat did bounce. Today a similar condo in the same complex is sitting below 120k and no offer. This is S C. California or S California cannot be immune to the Wall Street blood letting and consequential sufferring of the american people. It is only a matter of time. Majority of people in California are simple folks not that deep pocket as the TV shows portray. Reality is real and will be seen in time.

2008 Nov 21 11:11 AM

[Did U Think...:]

I think this is called "catching the falling knife". Sorry, a $500k shoebox in socal is really no better of a deal than a $1m shoebox in socal. Many of these people buying are taking advantage of the still too loose lending practices and they will turn the keys back in next year when the homes lose another 30% of their value. They have until Dec 31 2009 to do so without incurring a tax bill on the forgiven amount and so I expect a pick up in jingle mail to occur around june-july of 2009.

2008 Nov 21 01:09 PM