San Fernando Valley Home Sales Surge from Last Year's Low Point

Driven by foreclosures and homes sold by traditional sellers at favorable prices, sales of existing single-family homes in the San Fernando Valley during September soared a whopping 81.8 percent compared to a year ago, the Southland Regional Association of Realtors^® reported.

A total of 658 homes changed owners last month - 296 sales higher than in September 2007. Home sales have been steadily increasing since a year ago September - which set a record low of 323 sales -with this September posting the fifth consecutive month with the total at 650 sales or higher.

"Recovery of the local housing market is underway," said Mary Funk, president of the Southland Regional Association of Realtors. "Every time a foreclosed home finds a new owner or a buyer expresses confidence by buying a home from a traditional seller, we move a step closer to resolving the housing crisis and returning to some level of normalcy.

"Even as some home owners still struggle with the excesses of the past," Funk said, "once-in-a-lifetime opportunities to buy are available now or will soon emerge. Yes, it's more difficult to get a loan today, yet there are many programs available or emerging that are designed to aid current owners and help prospective buyers get into a home. No one knows how long these favorable conditions will be around."

It is to early to predict whether rescue efforts from the nation's capital will prolong or speed recovery, Funk said.

Funk and Jim Link, the Association's chief executive officers, said they expected foreclosed properties to continue to be dominant factor in the market, yet both expressed confidence that the worst of the fallout from the financial meltdown has passed.

"Recent sales activity and the number of properties that are already in escrow suggest that the market has hit bottom and is bouncing back," Link said. "Buyers want to take advantage of the relatively few properties listed for sale and capture prices that have not been seen in years." Buyers generally have been focusing on unique opportunities to purchase single-family homes, simply because homes that were too expensive two years ago now may be within reach.

Still, condominium sales also increased during September, soaring 36.1 percent to 21 1 transactions - 56 sales higher than a year ago.

September marked the third time in four months that condo sales exceeded the 200-transaction benchmark after stumbling along below 200 for 10 consecutive months with the 105 condo sales of this January being the low point of this cycle.

"There's no doubt that sales are being driven by favorable prices," Funk said. "Plus, a purchase today indicates that buyers realize that housing remains a relatively rare commodity in Southern California, which is expected to add tens of thousands of new residents over the coming years."

The median price of single-family homes sold during September declined 37.1 percent from a year ago to a median of $392,500. It was the first time since 2003 that the median dipped below $400,000.

Likewise, the condo median price of $260,000 dropped 33.3 percent - $1 30,000 lower than a year ago. September marked the fifth consecutive month that the condo median has been below $300,000. Today's median condo price was last seen in 2003 and early 2004.

Pending sales - a measure of future closed escrow activity - increased an incredible 163.1 percent during September. The Association reported a total of 1,305 open escrows at the end of the month. That compares to 496 year ago - one of the lowest tallies in recent years and close to the record low of 385 pending escrows posted in December 1991.

"Generally, people are surprised to learn that there is a relatively limited inventory of properties listed for sale throughout the San Fernando Valley," Link said. "Owners realize that this is not the time to test the market.

"That leaves two types of sellers," Link said, "both of whom are highly motivated: banks holding foreclosed properties and traditional sellers who either must sell due to personal circumstances, such as a work transfer, or owners who have sufficient equity in their current property and understand that whatever the perceived loss in a sale will be more than recaptured when they buy a replacement property."

There were a total of 6,009 properties listed for sale at the end of September, down 22.2 percent from a year ago.

At the current pace of sales, that represents a 6.9-month supply, only slightly on the high end of the 5- to 6-month supply which real estate experts believe indicates a balanced market. The inventory at the current pace of sales was at a 16.2-month supply this January when there were 6,928 properties for sale and a mere 428 total sales.

For comparison, during the housing downturn of the 1990s the inventory soared to a record high of 14,976 in July 1992 and the inventory at the then current pace of sales hit a high of 23.0-months.

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Santa Clarita Valley Home Sales Up

A total of 195 single-family homes changed owners throughout the Santa Clarita Valley during September, in increase in activity of 85.7 percent compared to a year ago, the Southland Regional Association of Realtors^® reported.

Twelve months have elapsed since the record low of 105 sales was set in September 2007, but today's market is looking very different.

"Activity is picking up with much of it centered on sales of bank-owned properties that are being sold as a result of foreclosure proceedings," said Doreen Chastain-Shine, president of the Association's Santa Clarita Valley Division. "It's back to basics with lots of hard work to complete the sale of a foreclosure or a property listed for sale by a traditional owner. However, it's clear that we near or at the bottom of this cycle and one-by-one foreclosures are being sold."

Condominium sales also increased 41.3 percent to a total of 89 transactions, the Association reported. Condo sales have been steadily increasing each month since they hit their low point of this cycle in January with 31 transactions.

"Sale of foreclosed properties will continue occupy the market for some time," said Jim Link, the Association's chief executive officer, "but I'm confident that the worst is passed."

The median price of single-family homes sold last month feel 22.6 percent from a year ago to $433,500, a drop of $126,500 from the $560,000 median of September 2007.

The median price has been inching lower since the record high of $643,000 was set in April 2006. Every month this year has seen the median come in under $500,000, but September was the first month to dip below $450,00.

Likewise, the condo median price of $250,000 was down 30.9 percent - a drop of $112,000 from the $362,000 median of September 2007. It was the first time since 2003 that the condo median hit $250,000.

"There are incredible opportunities on the market today and a growing number of buyers are casting a vote of confidence in the local economy," Chastain-Shine said. "Plus, it's likely that programs coming from Washington, D.C., will create even more options, especially for first-time home buyers."

Pending escrows - a measure of future resale activity - were up 148.4 percent at the end of September, suggesting that the market will remain strong for months to come.

Realtors reported a total of 1,588 active listings throughout the Santa Clarita Valley at the end of September, down 36.3 percent from a year ago.

At the current pace of sales, the active inventory represents a 5.6-month supply. Real estate experts believe a balanced market exists - where neither buyer nor seller have an advantage - when the supply hovers between a 5- and 6-months inventory.

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 Multiple Offers Reappearing

BY MARY FUNK, PRESIDENT, AND DAVID WALKER, SRAR

While many prospective home buyers are still waiting in hopes of catching the bottom, others are jumping into the residential real estate market feet first and, in a growing number of instances, they wind up competing with a swelling legion eager to capture a bargain.

At a recent meeting involving dozens of members of the Southland Regional Association of Realtors^®, all of the Realtors® said they had recently encountered home purchases where a handful of buyers presented competing purchase offers.

"It's happening in all price ranges and in all communities," one participant said.

Many of the properties have list prices that had been discounted from year ago levels, including a number of bank-owned houses that had been involved in foreclosure proceedings.

The activity level is no where near the frenzy of the seller's boom, the participants said, but offers are coming ion, near and, in some instances, above the already discounted list price.

The reports represented a significant shift in a market that had been paralyzed by buyers who had been glued to the proverbial procrastinator's fence. Buyers' hesitancy created endless work but no sales for Realtors®, who typically are not compensated until an escrow closes.

That lack of urgency now appears to be fading as more buyers enter the market at a time when government-sponsored programs appear to be setting the finance industry, thus making home loans more available and affordable - albeit at stricter qualifying guidelines which require proof of income and down payments.

Buyers who are entering the market believe they have a secure source of income, faith in the local economy and realize that waiting to catch the top or bottom of any real estate cycle is risky business, with success hinging on a large close of luck.

The recent increases in government-insured mortgage limits are expected to provide much-needed liquidity and stability to housing markets across the country.

That is especially true in California - a region with particularly expensive homes - where tens of thousands of families could be eligible this year to purchase or refinance their homes thanks to the recently approved Economic Stimulus Act.

The higher loan limit expands the pool of eligible borrowers, enabling more families to qualify for safe, affordable FHA-insured mortgage loans which can be as high as $729,750.

By focusing on 30-year, fixed-rate mortgages, FHA helps home owners avoid and escape the risks associated with exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.

While still at historically low levels, rising sales suggest that the worst may be past and that more buyers believe that the time to buy is now.

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Foreclosures Push Price Down 38%

Home Sales Up 18% Statewide

Home sales increased 17.5 percent in June in California compared with the same period a year ago, while the median price of an existing home fell 37.7 percent, the California Association of Realtors® reported recently.

"Statewide home sales remained above the 400,000 level for the said C.A.R. President William E. Brown. "Following a 30-month string of year-to-year percentage decreases that began in October 2005, sales during June also posted their third consecutive year-to-year gain.

"Sales were driven in part by large shares of deeply discounted distressed sales in many parts of the state," he said. "With lower prices and favorable interest rates, affordability also has improved significantly in recent months, paving the way for many buyers to purchase their first home."

The median price of an existing, single-family detached home in California during June 2008 was $368,250, a 37.7 percent decrease from the revised $591,280 median for June 2007, C.A.R. reported. The June 2008 median price fell 4.3 percent compared with May's $385,840 median price.

The inventory dropped from a 10.2-month supply to 7.7 months, assuming sales continue at the rate posted during June.

Thirty-year fixed-rate mortgages averaged 6.32 percent during June, compared with 6.66 percent a year ago. Adjustable-rate loans averaged 5.15 percent compared to 5.68 percent in June 2007.

It took a median of 49.1 days in June 2008 to sell a single-family home, compared with 51.5 days for the same period a year ago.

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The Housing and Economic Recovery Act of 2008

H.R. 3221, the "Housing and Economic Recovery Act of 2008" passed the House on July 23rd, and the senate on Saturday, July 26th. The President has said he will sign the bill. It includes:

GSE Reform - including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

FHA Reform - including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

Home Buyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008, and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).

FHA foreclosure rescue - development of a refinance program for  homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.

Seller-funded downpayment assistance programs - codifies existing FHA proposal to prohibit the  use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assitance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until Octob er 1, 2008.

VA loan limits - Temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.

Risk-based pricing - puts a moratorium on FHA using risk-based pricing for one year. This provision does will be effective from October 1, 2008 through September 30, 2009.

GSE Stabilization - includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.

Mortgage Revenue Bond Authority - Authorizes $10 billion in mortage revenue bonds for refinancing subprime mortages.

National Affordable Housing Trust Fund - Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.

CDBG Funding - Provides $4 billion in nieghborhood revitalization funds for communities to purchase foreclosed homes.

LIHTC - Modernizes the Low Income Housing Tax Credit program to make it more efficient.

Loan Orignator Requirements - Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.

For more information, visit www.realtor.org/governmentaffairs.

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Growing Number of Buyers Test the Market

Home buyers continue to test the market and hundreds of homes sold throughout the San Fernando Valley during June with sales only slightly behind numbers posted a year ago, the Southland Regional Association of Realtors^® reported.

Realtors closed escrow on 671 single-family homes during June, off 19 sales or 2.8 percent below the 669 sales of June 2007. A total of 230 condominiums also changed owners last month, off 15 sales or 6.1 percent below last year's 245 transactions.

"There is considerable activity out there with a growing number of buyers interested in the wide range of opportunities that this market presents," said Mary Funk, president of the Southland Regional Association of Realtors^®.

"Prices are favorable and there are some fantastic buyer assistance programs available," Funk said, "yet too often buyers make false assumptions about the market. Too often they fail to understand that real estate is very regional, very local, and that the market here is vastly better off than, for example, Riverside County and the Inland Empire which had far more new home sales and, as a result, many more foreclosures."

Unlike those areas, the inventory of homes for sale throughout the San Fernando Valley favors local buyers only slightly, thus making it less likely that sellers - be they real sellers, banks selling foreclosures or short sales - will accept steep discounts in the resale price.

"Yes we have foreclosures and short sales locally and yes they are up dramatically from historically low levels," said Jim Link, the Association's chief executive officer, "but in real numbers we don't have the vast unsold inventory of other harder-hit regions of the state."

A total of 6,935 properties were listed for sale at the end of June, up 1.6 percent from a year ago, but down 2.0 percent from May.

At the current pace of sales, the inventory represents a 7.7-month supply, only slightly higher than the 5- to 6-month supply deemed to represent a balanced market.

For comparison, at the height of the recent sellers' boom market the inventory frequently hovered at a less than 1-month supply. And, in the early 1990s, when a recession wracked the nation and California rebuilt its economy, the supply often soared above a 20-months, hitting a record 23-month inventory in January 1993 with total listings at nearly 15,000 in July of 1992 -double the number of properties on the market today.

Still, the impact of greater difficulty in qualifying for a loan, plus the presence of foreclosure - which are more complicated and take longer to conclude than traditional sales - have yielded fewer sales along with falling resale prices, Funk and Link said.

The median price of single-family homes sold last month was $431,000, down 34.2 percent from a year ago when the record high of $655,000 was set. The condo median price of $295,000 was off 26.2 percent. The condo record high of $41 5,000 was set in February 2006.

Too many buyers see reports of falling prices make the false assumption an offer that might make sense elsewhere will fly locally, but that often is not the case," Funk said. ‘They presume it is a desperate market and that people will sell way under market value, but sellers, especially banks, will still do an appraisal and will insist on market value.

"I know that people are hesitant, unsure where the economy is headed and they are wondering if prices will go even lower," Funk said. "At the risk of trivializing the plight of some homeowners or offering a cliche, this truly is a good time to buy. Prices are good and there are some fantastic programs out there now or coming soon that will help buyers, especially those entering the market for the first time."

Statistics support the notion that a growing number of people are entering the market.

Pending sales - a measure of future resale statistics - increased 20.6 percent from a year ago and were up slightly from May. There were 1,128 open escrows at the end of June, the third consecutive month that pending sales have increased and topped the 1,000 benchmark.

"We would have liked to have seen sales ahead of last year, but the difference is slight," Link said. "The increase in pending sales gives us some optimism that the market has hit bottom and sales activity will grow stronger incoming months."

Yet Link and Funk agreed that the market will achieve some measure of normalcy only when foreclosures and short pays have worked their way out of the system and the average consumer has renewed faith that lenders are secure and when they begin writing loans that make sense for home buyers.

"That is already happening," Link said, "We believe the healing process is already well underway."