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."