Sales of existing homes and condominiums in the San Fernando valley posted strong increases during May while the median price of single-family homes surpassed the $500,000 benchmark for the first time since February 2008, the Southland Regional Association of Realtors reported on Tuesday, June 25.
A total of 604 homes closed escrow during May, up 6.5 percent over a year ago and 7.9 percent ahead of this April. Home sales increased 87.0 percent from the record low set in January 2008 with the May tally rising above 600 for only the third time in the last two-and-a-half years.
Realtors also closed escrow on 253 condominiums last month, up 21.6 percent over a year ago and 31.8 percent ahead of April. Condo sales were 141.0 percent above the record low, which also came in January 2008.
“The market is working in the sense that pent-up demand for housing and a severely limited inventory combined to push prices higher,” said Sharon Barron, president of the Association. “There are still plenty of examples of listings receiving multiple offers, yet as prices rise there will be fewer buyers who can keep up.
“The recent rapid rise in prices speaks to demand, limited inventory, the presence of distressed properties, investors willing to pay all cash, and what some experts believe was an over correction in prices,” Barron said. “All those issues are fading, yet even with incredibly low rates on home loans, the underwriting rules for home loans are strict enough to rein in what last decade became a runaway horse.”
Barron and Jim Link, the Association’s chief executive officer, said they are not concerned about another bubble appearing with prices soaring out of reach for all but the most affluent buyers.
“The market is moving toward a good pattern, but not a frenzy simply because recent price increases are not sustainable,” Link said. “Underwater owners will have more options as prices continue to rise, returning them to a positive equity position, which should lead to more inventory and another rebalancing of the market.”
Indeed, the 1,142 active listings on the Association run MLS were down 30.5 percent from a year ago and a whopping 82 percent below the 28-year monthly average of 5,229 active listings. At the current pace of sales the 1,142 May listings represented a mere 1.3-month supply when a 6-month supply is needed to yield a balanced market.
Link and Barron noted that the tight inventory played a big role in the run up of prices with the May median price of single-family homes rising from $375,000 by 38.7 percent to $520,000. The median was up 53.4 percent from the record low of $339,000, though it remained 20.6 percent below the record high of $655,000 set in June 2007.
Similarly, the median price of condominiums that closed escrow last month came in at $310,000, up 40.9 percent from the $220,000 median posted a year ago. It was the first time since April 2008 that the median exceeded $300,000. The May median was down 25.3 percent from the record high $415,000 of February 2006, yet up 67.6 percent from the low of $185,000 in May 2009.
“What’s noteworthy is that appraisers, unlike five years ago, generally are coming in at reasonable prices, in large measure because we now have more comparables to justify price increases,” Link said. “That doesn’t mean an over-priced home will land a loan. It does mean appraisers are not devaluing a property and they are accepting price increases that can be supported.”
In another sign the market is moving toward a new normal, statistics generated by the Association show a remarkable increase in the number of standard sales.
Where distressed sales accounted for most resale activity over the last several years, standard sales made up 74.4 percent of May closings. Real Estate Owned properties, which lenders acquired typically through foreclosure, were down to 7.6 percent of total sales. Short sales, where lenders agree to accept a lower price than the outstanding mortgage balance, made up 16.8 percent of May closed escrows.
REOs and short payoffs combined not long ago accounted for nearly 60 percent of all local transactions.
The Southland Regional Association of Realtors® is a local trade association with more than 9,000 members serving the San Fernando and Santa Clarita Valleys. SRAR is one of the largest local associations in the nation.
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