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Southern California home prices hold steady

Figures for September indicate that low mortgage rates and a tax credit are providing support for the hard-hit housing market.

October 14, 2009|Peter Y. Hong and Tiffany Hsu

Southern California's housing market took another small step toward recovery in September as the median sales price for homes in some areas rose above last year's levels -- the first such increases since the market crashed.

The median price paid for all homes in six Southland counties in September -- $275,000 -- was unchanged from August and 11% below the same month last year, according to San Diego-based MDA DataQuick.

But in Orange County, the median price rose modestly to $429,000 from $425,000 in the same month last year -- the first year-over-year gain since 2007, DataQuick said. If condominium sales are excluded, last month's median home sales prices in San Diego and Ventura counties also beat their September 2008 levels.

Christopher Thornberg, a Los Angeles economist who was an early predictor of the housing bubble, said several factors converged last month to give home sales a boost.

"Tax breaks, low interest rates and pent-up demand added up to create a surge in sales that's surely gone some way in stabilizing prices," he said.

But Thornberg cautioned that prices could fall again.

"The question continues to be, 'How is this going to stand up when the next wave of foreclosures hits the market?' " he said.

Even if the housing market takes another hit in the coming months, the bulk of the market correction is past, Thornberg said.

"If prices do fall again, it'll be another 10% to 15% max," he said.

The Southern California median price remains at 2002 levels, even without considering inflation, and is 46% below its peak level of $505,000 set in 2007. The median is the point at which half the homes sold for more and half for less.

Those relatively low prices and an $8,000 federal home-buyer tax credit set to expire at the end of November pushed the number of homes sold in September up by 5% over the same month last year and 0.2% above August.

Home sales in the last year picked up first in the lowest-priced inland areas, where a massive number of foreclosures pulled prices down. Last month's sales, with rising median prices in some areas, show that the mix of homes sold is normalizing.

Sales of homes priced at or above $500,000 constituted 21% of the total, up from 13% in January, DataQuick said.

Previously foreclosed homes are accounting for a smaller share of sales. In September, 40% of homes sold had been foreclosed within the last 12 months, down from a high of 57% in February.

Various studies show that the number of Southern Californians who are substantially behind on their mortgage payments is growing, suggesting more foreclosures are on the way.

But foreclosures in the region have been declining as banks backed off from repossessing homes either voluntarily or to comply with state or federal foreclosure freezes.

Statewide data released Tuesday by ForeclosureRadar, an online seller of default data, show bank repossessions in September were down 42% from the same month a year earlier. The slowing of bank repossessions has cut the supply of homes for sale in the upper-middle range of the market.

That has frustrated many buyers like Daisy Lee, who recently had an offer accepted on a Monterey Park house -- after losing to other bidders six previous times. Lee and her husband tried for a year to purchase houses priced from about $500,000 to $700,000 in various San Gabriel Valley cities.

"There's a lot of competition in the areas we've been looking," said Lee, an accountant. Lee said she and her husband offered slightly above the list price to get the house they hope to move into, with an offer of about $600,000.

"We were desperate. I didn't know how much longer we wanted to wait," she said.

Their frustration aside, buyers like Lee are raising the median by purchasing higher-priced homes.

"I think prices are fundamentally at a bottom," said Richard Green, director of USC's Lusk Center for Real Estate.

"There could be some weakness in the next year that brings things back down a little bit," he said, adding, "I wouldn't be jumping for joy yet, but these numbers are not bad."

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peter.hong@latimes.com

tiffany.hsu@latimes.com

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