Recently unveiled Obama Administration programs are likely to bolster the ongoing recovery of the home resale market, yet the end of federal and state tax credits mixed with consumer hesitation and seasonal trends yielded the third consecutive month of declining local home sales, the Southland Regional Association of Realtors reported on Tuesday, Sept. 21.
Sales during August throughout the San Fernando Valley fell 19.6 percent from a year ago for a total of 539 closed escrows. Condominium sales were off 9.6 percent. Even with the declines, single-family sales nonetheless were up 66.9 percent and condo sales have risen 98.1 percent from the low points of this recession.
Industry leaders saw the current phase as a transitional period that may well yield more activity come Spring 2011 along with a transformed and stabilized market.
"Sales always taper off with the end of summer and the beginning of the school year as families want to stay in place, yet the loss of the federal and state first-time buyer credits truly had a impact," said Patti Petralia, president of the Southland Regional Association of Realtors. "With the inventory growing slightly and with interest rates at historic lows, the only other explanation for slower sales is a simple one — a psychological factor, there's a fear factor. People question if their jobs are secure."
Petralia and Jim Link, the Association's chief executive officer, agreed that programs recently implemented by the Obama Administration designed to aid current owners and prospective buyers will go a long way toward bolstering consumer confidence.
The "Keep Your Home" program, which extends aid to unemployed owners at risk of foreclosure, and "First Look," which levels the playing field by giving owner-occupant buyers 15 days before investors can make an offer, are expected to stabilize and boost the residential resale market, which is the engine that typically leads the economy out of recession.
This slowdown in activity is merely the prelude to the new normal, Link said.
"The reality is that every component of the real estate market is in transition, especially when it comes to financing," Link said. "Lenders overreacted to an era of no limits by imposing impossible rules. Yet already there are signs that lenders are moving toward reasonable lending standards that are likely to yield long-term stability and predictability."
Link and Petralia said they expect to seen a growing number of lenders hold onto home loans longer before packaging them for sale on the secondary mortgage market, a move that would ensure that loans are sustainable and profitable for the lender while guaranteeing that borrowers could truly afford the loan and make monthly payments over an extended period.
Until this transition phase ends — marked by the demise of foreclosures and short sales — the market is likely to remain volatile. Link and Petralia expect sales to be stronger in 2011.
The August slowdown eased the pressure on the inventory with the 3,921 active listings reported at the end of the month up 28.8 percent from a year ago. Even with the increase in listings, the inventory represented a mere 5.2-month supply at the current pace of sales. That's a distinct improvement from the 3.4-month supply reported a year ago. A 5- to 6-month supply represents a balanced market.
Local resale prices held up better than in other communities throughout Southern California with the $400,000 median price of single-family homes sold during August up 2.8 percent from year ago levels. The condo median of $230,000 was unchanged from August 2009 while the single-family and condo medians posted gains from this July. The single-family median is up 17.7 percent and the condominium median price rose 21.1 percent from the low points of this recession.
Not surprisingly, given seasonal factors and ongoing consumer uncertainty, pending escrows, a measure of future resale activity, were down 15.3 percent.
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.