Home resale activity increased during December—boding well for 2015—while 2014 went into the history books as the year when investors and distressed sales vanished, lenders relaxed loan underwriting standards, traditional buyers returned, and consumers adjusted to new realities, including a moderate 9.0 percent increase in the annual median price.
Realtors throughout the San Fernando Valley negotiated $4.6 billion in home and condominium sales during 2014, the Southland Regional Association of Realtors reported on Monday, Jan. 26.
That total does not include the additional tens of millions of dollars home sales generate for the local economy in related transactions, including appliance and furniture sales or landscaping and remodeling projects.
The annual median price of single-family homes sold increased for the third consecutive year, yet the 9.0 percent increase to $518,833 was well below the 24.1 percent jump in 2013 when investors pushed prices higher in an intense but short-lived bidding war following the price collapse caused by the national recession.
2014 was the first year since 2007 that the annual median home price came in higher than $510,000. The annual median reported in 2007 was a record high $611,933.
“What we saw during 2014 was a return to normal,” said Gaye Rainey, the 2015 president of the 9,100-member Southland Regional Association of Realtors. “We’re completely finished with 20 percent annual price inflation and back to a world where home ownership is a long-term proposition with moderate annual price increases.”
Rainey and Jim Link, the Association’s chief executive officer, agreed that 2015 will be the first entirely truly normal year since the recession.
“We weathered the storm of distressed sales and investors bidding up prices,” Link said. “Now the market has calmed down. We expect an increase in sales in 2015, especially now that regulators are relaxing overly-tight underwriting standards and consumers have growing confidence in the economy and their financial future.”
The condominium annual median price increase also moderated during 2014, coming in at $319,667, up 4.9 percent over 2013. It was the third consecutive year the annual condominium median price increased, yet the single-digit gain in 2014 was welcome after a 30.9 percent leap in 2013.
“I was concerned about first-time buyers, especially millennial buyers who truly understand the value of starting on the ownership ladder with a condo or townhome,” Rainey said. “Huge price increases limit the pool of prospective buyers, yet the slower price increases resulted from savvy buyers pushing back, refusing to pay over-inflated prices, and that’s a really good thing.”
Rainey and Link do not expect prices to return to the record highs posted during the last decade.
With investors and distressed sales largely out of the picture, the annual home sale total came in at a record-low 5,643, down 6.9 percent from 2013. The annual sales total has been trending lower since the post-recession peak of 7,793 closed escrows reported by the Association in 2009.
Condominium resales fell 19.6 percent to a total of 1,983 units. It was the largest percentage annual drop since the 33.2 percent plummet of the crash in 2007, but followed an 11.9 percent increase in 2013.
“Traditional buyers and sellers stood on the sidelines while distressed sales worked their way through the market and price increases gave owners additional equity,” Link said. “Many consumers had been squeezed out by investors, but now there’s renewed optimism that those buyers and sellers will jump back into the market, leading to a gradual rise in inventory and additional resale activity.”
Properly priced homes still attract multiple offers and sell quickly, Rainey said, noting that homes are selling at or slightly over list price, but today’s buyers, while unafraid of competition, will stop bidding simply because they know what a house is worth.
“If they can’t find what they want at the price they want, buyers and sellers will stay where they are,” Rainey said, estimating that more than 50 percent of sales she monitors are contingent on the seller finding a replacement home. “Escrows take longer,” she said, “but they do tend to succeed.”
2014 ended with December sales of 522 single-family homes up 3.2 percent over a year ago and 24.3 percent ahead of November. Condo sales of 174 units fell 16.3 percent from December 2013, yet rose 13.0 percent over last November.
The total active inventory of 1,390 listings was up 13.6 percent over a year ago, for a 2.0-month supply, which was well short of the desired 6-month supply. Pending escrows, a measure of future resale activity, increased 15.1 percent, suggesting the 2015 home buying season is off to a solid start.
The Southland Regional Association of Realtors® is a local trade association with more than 9,100 members serving the San Fernando and Santa Clarita Valleys. SRAR is one of the largest local associations in the nation.