High-end sales boost home prices
More 'jumbo' sales in S.F., L.A. regions
By Inman News, Friday, June 19, 2009.A pickup in sales of homes financed by jumbo loans in May helped boost median home prices in the San Francisco Bay Area and the "Southland" region surrounding San Diego and Los Angeles, MDA DataQuick reported.
In the nine-county San Francisco Bay Area, the median home price was up 12.3 percent from April to May, to $341,500, DataQuick said -- an 18 percent increase from the low of $290,000 seen in March.
The jump was attributed to an increase in sales of homes financed by "jumbo" mortgages above $417,000. Sales of homes requiring jumbo mortgages accounted for 25.5 percent of the Bay Area's home sales in May, the highest since October.
Two years ago, sales of homes financed by jumbo mortgages accounted for more than 60 percent of sales in the region, and the median home price was $665,000, DataQuick said.
Sales of $800,000-plus existing single-family houses accounted for 13.2 percent of all resales in May, up from 9.8 percent in April and also a high not seen since October
The number of existing homes sold in the San Francisco Bay Area increased for the ninth month in a row, to 7,447, a 19.8 percent increase from the record low seen a year ago.
In Southern California, the median home price in the six-county Southland area increased by 0.8 percent from April to May, to $249,000 -- the frist increase since July 2007, DataQuick said.
A total of 20,775 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties in May, up 1.3 percent from April and the 11th consecutive month of sales growth.
Homes priced $500,000 and higher made up 17 percent of sales, up from 15.2 percent in April and the largest share since last October, when those homes represented 19.9 percent of sales.
About 12 percent of home sales in the Southland region during May were financed with jumbo loans, compared with 40 percent before the credit crunch hit. Jumbo loans became more expensive and harder to obtain in August 2007, when the secondary market for mortgage-backed securities not guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae dried up.
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Submitted by Barry Noble on June 19, 2009 - 8:54am.
This is why Median Home Prices are not the way to judge the Residential real estate Market.
When the Market is (in happier days) in a cyclical upswing - it sounds good to watch the Median Home Price rise. Most of the various price levels are all rising and the more high end sales, the better the lower priced buyers feel about their purchases, as the Median Home Prices rise sharply. It's phoney but is a "feel good" scale.
When the Cycle is in a downturn - the Median Home Price is NOT reflective of the actual Market, by any means. This can be the really bad time for such an indicator scale.
Example: Maybe there are a lot of post foreclosure sales and the high end sales are stagnant. There's a low Median Home Price for the area. Now, a little later, say the post foreclosure sales prices are still dropping, but there's a flurry of high end sales, with buyers not necessarily affected by the downturn. Suddenly the Median Home Price reflects the few high end sales, and rises sharply - falsely signalling an upswing in the Market as a whole.
This can bring on a flurry of buyers that had been waiting in the wings, into the lower valued property range - only to find in a few months, those new purchases were not at "the bottom" of the price scale, and there are some "sorry" new home owners out there, watching their new purchase home values drop.
All REPORTED residential real estate markets should be further divided into value levels, before reporting, not mixing them altogether, which is both confusing and phoney. To gete a true handle on the Market, we need to check on values in groups, such as:
Properties up to $200,000
Properties $201,000 to $400,000
Properties $401,000 to $750,000
Properties $751,000-$999,999
Properties $1,000,000 to $3,000,000
Properties $300,000,001 to $10,000,000
Properties over $10,000,000
This will give an honest data evaluation of how the local markets are REALLY doing. It will be nothing like the grossly inaccurate Median Home Price reporting.
Barry Noble
http://www.MyPropertyIsWorth.com
Palm Springs CA