San Fernando Valley Home Sales Increase for the Fifth Consecutive Month

The residential real estate market in the San Fernando Valley faired better than other regions of the state during May as buyers negotiated enough bargains to post the fifth consecutive month of sales increases, the Southland Regional Association of Realtors® reported.

Increased sales activity in the lower price ranges continued to bring the median price of homes sold down while also reducing the inventory of properties listed for sale.

"The old cliche that all real estate is local has never been more true than today," said Mary Funk, president of the Southland Regional Association of Realtors®. "There is local activity, people are looking for homes and a growing number of buyers are capturing excellent bargains.

"People are thinking that the worst might be past, that this might be the bottom and if they don’t buy now they will have lost a golden opportunity," Funk said.

Interestingly, Funk and Jim Link, the Association’s chief executive officer, said that Realtors® report a market where some homes sell quickly, sometimes with multiple offers, while others languish on the market, snubbed by buyers hoping to capture sometimes unrealistic deep price discounts.

"All sales are taking longer because of stiffer qualifying standards set by lenders," Link said. "Too many buyers incorrectly think that a foreclosure or short-sale property offer the best opportunity. Yet, traditional sellers, especially those with even limited equity, will be much more open to negotiation than a bank trying to sell a foreclosure.

"Plus, the added advantages of dealing with traditional sellers include a much faster, easier escrow process and a willingness on the part of sellers to make concessions and repairs," Link said. "By comparison, foreclosures and short sales can take two to three times longer. Banks typically have little desire to negotiate on a property where the price might be lower the outstanding loan and the current market value."

A total of 669 single-family homes closed escrow throughout the San Fernando Valley during May. That was an increase of 6.4 percent from a year ago and 22.3 percent higher than the April sales total. While overall activity remains low by historical standards, every month since January has seen more sales consummated with the help of Realtors®.

Following traditional buyer preferences, condominium sales were down 32.8 percent from a year ago to a total of 168 closed escrows. However, condo sales did rise on a month-to-month basis, posting a 15.1 hike over April.

"Even though there is a wide selection of imminently affordable, high-quality condominiums," Link said, "typically, when the opportunity presents itself, buyers prefer to buy a single-family home, especially during a market cycle when home prices are soft and sellers are eager to cooperate."

The median price of single-family homes fell 30.8 percent to $450,000 as buyers focused on properties priced under $500,000.

Likewise, the median price of the 168 condos sold last month fell by 22.7 percent to $229,000.

Pending sales - a reliable measure of future sales activity - suggest that sales will remain strong through the coming months as buyers show ongoing faith in the local economy and the residential real estate market. The pending sales total of 1,122 open escrows was up 19.9 percent from a year ago and 3.7 percent higher on a month-to-month basis.

"The media likes to lump all markets into one overly broad generalization," Funk said. "Yet the mature, much more developed, establish San Fernando Valley market is not the same as the Inland Empire which saw vast tracts of new home construction and many, many more first-time buyers, some of whom took on loans that were way beyond their means.

"As a result," Funk said, "the San Fernando Valley does not have nearly as many properties that are on the market as a result of a foreclosure or short sale. That’s why we’re not flooded with a huge inventory."

Indeed, the 7,078 properties listed for sale throughout the San Fernando Valley was a surprisingly low number. It was up 5.7 percent from a year ago, but down 2.2 percent from the April tally.

At the current pace of sales, the inventory represents a mere 8.5-month supply. That is still a buyers’ market, but the inventory is down from the double-digit supply of recent months and close to the 5- to 6-month supply deemed to represent a balanced market.

For comparison, the number of properties listed for sale during the 1990s hit a record high of a 23-month supply. Even at the worst point in the current cycle, the highest the inventory rose was to a 15.1-month supply.

"Dire news reports often do not match the reality on the ground and the relatively limited inventory of homes for sale locally is just one more area where that becomes obvious," Link said. "Today’s inventory is no where near what we had during the deep national and state recessions of the early 1990s. Are there problems today? Of course, but by historical standards the market is rather quickly working out the trouble caused by a unwise lending practices and a crisis in the financial markets."