Resale prices continued to firm up during January, but a combination of factors — a low inventory, confusion over the federal tax credit, and seasonal forces — yielded a slowdown in sales of single-family homes throughout the San Fernando Valley, the Southland Regional Association of Realtors reported on Wednesday, Feb. 24.
Sales typically are light during the Winter months, but the 4.6 percent drop in single-family sales at a time when buyers are scrambling over each other for any property priced under $500,000, had to be due to other factors. A total of 494 homes changed owners last month compared to 518 a year ago.
"The low number of sales had very much to do with the $8,000 federal tax credit for first-time home buyers, which everyone thought was set to expire at the end of November," said Patti Petralia, president of the Southland Regional Association of Realtors. "The credit has since been extended to the end of April and expanded to include repeat owners, but the original scheduled deadline dissuaded many buyers from going forward."
Yet even that doesn't fully explain what turned out to be one of the lowest monthly tallies since the recovery took hold, Petralia said. Sales had been steadily increasing since hitting this cycle's low-water mark of 323 closed escrows in January 2008.
Jim Link, the Association's chief executive officer, noted that the extremely limited inventory of homes listed for sale also combined to drag sales down.
"Throw in the fact that distressed properties and short sales continue to haunt the market, while it's still taking too long for lenders to decide if they will accept an offer, and it's easy to see why sales slowed during January," Link said. "We expect to see activity pick up as Spring approaches and lenders further improve their response times."
Pending home sales — a measure of future sales activity — were up 6.1 percent from a year ago.
There were only 2,776 homes and condominiums listed for sale at the end of January, down 41.6 percent from the 4,750 active listings of a year ago.
The Association's current-pace-of-sales-to-inventory index — a measure of the fundamental health of the local market — stood at a 4.0-month supply, a number that in a normal market would tip the balance of power in favor of sellers.
"The pent-up demand for housing certainly adds pressure on prices," Link said. "Yet the normal rules will not apply until more traditional sellers list their homes for sale and the market works through the inventory distressed properties, which still represent a majority of the active listings."
Two years ago January, when sales were low and inventory higher, the index hit its peak for this recession with a 16.2-month supply and some 6,928 properties listed for sale. The ideal is to have a 5- to 6-month inventory, which comes closer to a balanced market.
A total of 204 condominiums closed escrow during January, up 22.9 percent from a year ago, but down 13.6 percent from the December tally. Condos also suffer from a limited inventory even as sales have recovered at a slower pace as buyers focused on the unprecedented opportunities to purchase single-family homes.
The median price of homes and condos continued to firm up during January. Single-family homes sold last month had a median price of $380,000, up 8.6 percent from a year ago. The single-family median has been steadily increasing since dropping to the low point of $339,900 in February 2009.
Likewise, the condominium median price of $215,000 was up 13.2 percent. It, too, has been rising since its low of $185,000 last May.
Petralia said the health of the market greatly depends on what lenders do in the coming months.
"We need a streamlined process that ensures that short sales close with 90 days of submission to lenders," Petralia said. "What would help the process is legislation to allow loan servicers broader authority to approve short sales on behalf of investors."
While foreclosures generally close escrow within a reasonable time frame, Petralia said, "it often takes six months or longer for short sales to close."
When a lender takes longer than three months to decide, she said, "buyers become frustrated and walk, the property's condition deteriorates, and the overall value declines."
Petralia hoped that the recent HUD waiver making FHA-insured loans available to homes purchased by investors and resold with 90 days will further stabilize the market by helping buyers with a low down payment get into vacant homes before distressed properties become a blight on the community.
"Too often it still takes six months or longer to close escrows," Petralia said. "That's an improvement from a short while ago, but it is imperative that we have even greater cooperation."
The Southland Regional Association of Realtors® is a local trade association with more than 10,000 members serving the San Fernando and Santa Clarita valleys. SRAR is one of the largest local associations in the nation.