The inventory of homes listed for sale throughout the San Fernando Valley continued to shrink during May, prompting more multiple offers on the dwindling number of local homes that change owners each month, the Southland Regional Association of Realtors reported on Wednesday, June 23.
A total of 679 single-family homes closed escrow last month, down 4.1 percent compared to a year ago. However, May sales were 5.4 percent higher than the 644 sales of this April. Realtors also closed escrow on 213 condominium sales last month, down 5.8 percent from a year ago and off 1.8 percent from this April.
"No doubt the end of the $8,000 federal tax credit program hurt sales activity, discouraged some buyers, and may yield a lull in the market until buyers adjust," said Patti Petralia, president of the Southland Regional Association of Realtors. "The loss of the federal credit may be offset with California's $10,000 tax credit, although those funds most likely will be used up very quickly.
"The state estimates that more than 15,200 applications had been received as of June 15 for California's first-time buyer credit program with another 5,600 applications on file for the new home credit. If approved, those applications would account for about $78 million of the first-time buyer credit and $36 million of the new home credit. Each program is capped at $100 million.
"More than the loss of the tax credits, the tight inventory especially in the median and low price ranges is the real factor limiting sales," said Jim Link, the Association's chief executive officer. "Traditional sellers are not listing in any great numbers and even listings of short-sale or foreclosed properties are extremely limited.
"Even though reports are that lenders have an appreciable amount of foreclosed properties on the books, they are not being released to the market place in significant numbers," Link said. "While obviously flooding the market would not be wise, the demand is there to absorb a higher volume than we are seeing now."
There were only 3,375 active listings throughout the San Fernando Valley at the end of May, off 6.9 percent from a year ago. At the current pace of sales, that represents a 3.8-month supply, lower than the 3.9-month inventory in 2009 and well below the 8.5-month supply of May 2008. A balanced market appears when the inventory lingers in the 5- to 6-month range.
With fewer properties listed for sale, competition for properly-priced listings remains intense, Link and Petralia said, noting that virtually every listing receives multiple offers, which drive the purchase price higher than the list price.
The median price of single-family homes sold in May was $385,000, up 10.0 percent from May 2009 and 1.6 percent ahead of this April.The gap between the current median and the record high of $655,000 set in June 2007 is slowly narrowing. As of May, the median was 41.2 percent below the record high. A year ago it was down 46.6 percent.
Likewise, the condo median price of $233,000 was up 25.9 percent from the $185,000 median of May 2009. It fell by 6.8 percent from this April's $250,000 median price, which was the highest since the slide began.The gap between the condo current price and the record high of $415,000 set in February 2006 also is closing, although a little faster than for single-family homes. A year ago the condo median was 55.4 percent below the record high; last month it was 43.9 percent lower.
"We won't see stable prices with real gains so long as short-sale and foreclosed properties account for the majority of sales," Link said. "Prices are inching up from record low levels because of the pressure created by multiple offers on entry level-priced homes, especially from investors who often come in with all cash, which typically captures the sale.
"Traditional buyers in the median and upper price ranges are limited by two factors," Link said. "Generally, they have to sell their home before they can buy, yet even if that happens, obtaining a jumbo loan on the new purchase is too difficult if not impossible. It's a double whammy.
"Pending escrows — an indicator of future activity — suggest that sales during the typically busy summer months will continue to slow. There were 1,089 open escrows at the end of May, down 18.4 percent from a year ago when 1,335 escrows were pending.
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.