With the selection of homes listed for sale steadily expanding, buyers during July closed escrow on the highest number of single-family home sales in 14 months, the Southland Regional Association of Realtors reported on Monday, Aug. 25.
A total of 562 homes changed owners during July, up 7.3 percent over a year ago and 7.0 percent ahead of this June’s tally. The 197 condominiums that sold during July were down 19.3 percent compared to a year ago, but up 11.9 percent from this June.
“The fact that single-family home sales have increased signals that we’ve transitioned into a normal market,” said Roger Hance, president of the Southland Regional Association of Realtors. “Last year the market was busier, but that was driven by the presence of distressed properties, which have largely vanished, and all-cash buyers, who are few in number and highly selective now that prices are higher and the bargains are gone.”
The median price of single-family homes came in at $520,000, up a modest 3.0 percent, yet off by the same percentage from the June median, which was the highest since December 2007.
The condominium median price of $309,000 was off 6.4 percent from July 2013 and 4.9 percent lower than the June 2014 median. Home and condominium median prices have increased 53.4 percent and 67.0 percent from their respective record lows for this cycle yet both are still well short—20.6 percent and 25.6 percent, respectively—of their record highs.
Hance and Jim Link, the Association’s chief executive officer, agree that prices are flattening out and unlikely to soar near record heights anytime soon, which is another signal that the market is settling into a newfound stability.
“It’s back to basics, in that negotiating is again standard. No more bidding wars with over list price offers,” Link said. “Sellers asking too much for their property see little or no activity. Instead of multiple offers over list price, which were common a year ago, offers below asking price are spreading now, which keeps price gains in check.”
An expanding inventory gives buyers more choices and leverage in negotiations, yet the number of homes on the market remains well short of what the market needs.
A total of 1,874 active listings were reported at the end of July, up 27.5 percent from a year ago and the largest inventory since March 2012. At the current pace of sales that represents a 2.5-month supply compared to the 1.4-month inventory of July 2013. A 6-month supply is desired.
Hance and Link also said that recent changes in how FICO credit scores are calculated may expand the pool of prospective buyers, especially if lenders, as expected, pull back from overly strict lending guidelines.
“We sure do not want another run up in prices or another market meltdown,” Link said, “but lenders rules have been so tight they were not making loans. Hopefully, the new standards that are emerging will be reflective of a borrower’s true ability to repay the loan, not some unattainable benchmark.”
Distressed sales continued to fade away with foreclosure-related and short sales combined capturing 10.6 percent of total residential resale activity. There were a mere 21 Real Estate Owned foreclosure sales and 59 short sales during July. In April 2013 there were 77 REOs and 146 short sales, accounting for a combined 29.6 percent of total residential sales.
Standard sales, involving traditional buyers and sellers, cornered 88.0 percent of July sales. In January 2013 standard sales made up 65.0 percent of total activity.
The Southland Regional Association of Realtors® is a local trade association with more than 8,900 members serving the San Fernando and Santa Clarita Valleys. SRAR is one of the largest local associations in the nation.