Tuesday, September 02, 2008

San Fernando Valley Homes Sales Up - Market Update

San Fernando Valley Single-Family Homes and Condominium Resale Statistics

San Fernando Valley home sales surged 16% during July as buyers raced to grab bargains; median price down 31%Buyers jumped into the resale housing market during July, pushing sales of existing single-family homes in the San Fernando Valley up 16.2 percent from a year ago and 6.9 percent higher than the June tally, the Southland Regional Association of Realtors reported on Thursday, Aug. 29.

While still at historically low levels, sales have increased every month this year since January.
“The numbers indicate that the market has definitely bottomed out with sales now on the upswing,” said Mary Funk, president of the Association. “Demand is increasing because people realize that what they could not afford before they probably can afford now. Come next year, people who are waiting will find that they will be paying more.”

Realtors across the San Fernando Valley report a resurgence of multiple offers on properties as buyers compete with each other over the most favorably priced homes. Many of those offers present ridiculously low prices which have virtually no chance of being accepted, especially by banks that have little negotiating latitude as they try to recoup investments on foreclosed properties.

“Lenders are taking their time and letting offers accumulate,” Funk said. “It’s taking a lot more work and more time for a sale to close as lenders make borrowers jump through more hoops.”
Nonetheless, sales activity in the under-$500,000 price range is “solid,” Funk said, while above $700,000 activity remains sluggish, primarily because of tighter requirements on home loans.
As lenders adjust to new rules, Funk and Jim Link, the Association’s chief executive officer, expect lenders to start writing loans in the higher price ranges, thus fueling a resurgence in that segment of the market, too.

Because buyers are striving to take advantage of a rare opportunity to buy a single-family home at a favorable price, condominium sales lagged during July. A total of 205 condos sold, down 25.7 percent from a year ago and off 10.9 percent from this June. Condo sales had been moving up every month since January with July being the first decline this year in month-to-month condo activity.

“We’re optimistic that the light we see at the end of this tunnel is not the train,” Link said. “This recession, as bad as it was for homeowners and lenders, does not appear likely to last as long as the national recession of the 1990s. We should start to see a strengthening of the market in 2009.”

Link and Funk agreed that prices will not solidify until foreclosures and “short sales” – which Link characterized as the ‘elephant in the room’ – work their way out of the system.
They also agreed that the real numbers of foreclosures and short sales are likely to wane in the coming months, especially as lenders implement new procedures and the recently-approved economic stimulus package plus other moves by federal authorities begin to take effect.
“While bank-owned properties and short sales remain a major factor,’ Link said, “the San Fernando Valley is not in the same position as, for example, the Inland Empire, where foreclosures represent a much higher percentage of their inventory.”

The single-family median price of $435,000 was down 31.0 percent compared to a year ago. However, it did post a modest gain compared to June, up 1.0 percent. The median has been falling since the record high of $655,000 was set in June 2007.

The condo median of $280,000 was off $127,500 or 31.3 percent compared to July 2007. The condo record high of $415,000 was set in February 2006.

Link said he expects the market to remain busy and perhaps pick up added momentum in the coming months. Pending escrows – a measure of future resale activity – support that view.
There were 1,141 open escrows at the end of July, 39.2 percent higher than a year ago and up 1.2 percent from this June. It marked the third consecutive month that the pending sale total has topped the 1,100 benchmark.Funk said that many prospective buyers are surprised to learn from their Realtor that the inventory of homes for sale while higher than just a few years ago is not excessive.

There were 6,950 active listings throughout the San Fernando Valley at the end of July, down 3.4 percent from a year ago. Of that total, single-family homes accounted for 75 percent of the active listings.

At the current pace of sales, the active inventory represents a 7.5-month supply – slightly higher than the 5- to 6-month supply deemed to represent a balanced market.
By comparison, the inventory during the recession of the 1990s hit a record high of 14,976 in July 1992 and the inventory compared to pace of sales was three-times higher at a 23-month supply.

Contrary to an inaccurate public perception, the active inventory in the San Fernando Valley has been trending lower since November 2007 when it stood at 7,505.
Written by the Southland Regional Association of Realtors.

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