Southern California's median home price climbed for a fourth straight month in August, boosted by investors snatching up homes in distant suburbs and a relative decline in foreclosed homes for sale, a real estate research firm reported Tuesday.
The median price inched up 2.6% from July to $275,000, according to MDA DataQuick. The market bottomed out in April at a $247,000 median, the San Diego company said.
Behind the price improvement are investors like Robert S. Moore, a Rancho Palos Verdes management consultant, who is wrapping up his third home purchase in as many months. Moore, 50, is paying $90,000 for a four-bedroom house in the Riverside County city of La Quinta, which he plans to rent out for at least 10 years.
"How much lower can it go? I'm buying them for less than it costs to build them," Moore said of his investment properties.
Investors made up 20% of purchases in August, up from 17% in January. When homes can be bought for less than $100,000, Moore said, the risk of further price declines is hardly worth worrying about.
Even with last month's increase, the median price remains at 2002 levels. It is down 45.5% from its peak of $505,000 reached in 2007, and 16.7% below the same month a year ago. The median price is the point at which half the homes sold for more and half for less.
Although investors and first-time buyers are firming up prices of low- to mid-priced homes, UCLA economist Edward Leamer cautioned that movements in the median price were more a reflection of the number of foreclosed homes on the market and that the housing market remained soft.
"The fraction of homes sold by banks is on the decline," he said. "The typical homeowner shouldn't think the value of their home is moving along the same lines."
And although home values are still dropping in many neighborhoods, rising home sales and median prices are "all symptomatic of a bottoming out" and the worst days of the housing market are probably over, Leamer said.
Foreclosure sales accounted for 38.8% of homes sold in August, down from a peak of 56.7% in February. DataQuick said most of the decline was the result of a rise in sales of non-foreclosed homes; a backlog of bank-repossessed properties that have yet to be put on the market (resulting in a smaller pool of foreclosures for sale) also contributed to the drop.
The number of homes sold in August, although up 11% from August 2008, was down 10.8% from July. August sales totals typically are higher than July sales, DataQuick said. The total of 21,502 homes sold in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties last month was substantially below the average tally of 27,458 for August home sales since 1988, DataQuick reported.
"Foreclosures are what have been the strong sellers thus far," said DataQuick analyst Andrew LePage. The smaller inventory of foreclosures for sale, combined with lingering buyer skittishness, held August sales back, he said.
While mortgage defaults continue to rise, the number of foreclosures is falling because of government interventions and voluntary efforts by banks to modify loans rather than foreclose. ForeclosureRadar, an online seller of default data, reported Tuesday that California foreclosures in August were 32% below the same month a year earlier.
A federal foreclosure prevention program in effect since spring is keeping homes from being repossessed, said Sean O'Toole, chief executive of ForeclosureRadar. He expects the number of foreclosures to remain low even if the latest government program falters.
"Don't expect a wave of foreclosures if it fails; expect further government intervention," he predicted.
Many foreclosed homes remain on the market in the Inland Empire, however.
In August, foreclosures accounted for 57% of sales in San Bernardino County, though that figure was down from a peak of 69.3% in April. Foreclosures constituted 50.7% of Riverside County sales in August, down from 71.2% in January.
That has driven prices down and attracted an even higher proportion of investors. Investors constituted 28.7% of buyers in San Bernardino County last month, and 22.7% of Riverside purchasers.
Some investors, including Steve Zalewski, 59, want to buy a home before prices start to go up -- even if there's a chance they could fall further. Zalewski bought a three-bedroom house in Palm Desert last month for $390,000.
Zalewski, who lives in the Northern California town of Danville, said he and his wife planned to move into the house in a few years, but bought it now to ensure they would lock into a low price and low mortgage rate. They will rent it out in the interim.
"My feeling was this was a magical point in time" because of low prices and interest rates, Zalewski said.
Even with the uptick in home prices, affordability remains strong across Southern California. The typical monthly mortgage payment for a Southern California buyer in August, including principal and interest, was $1,207, up from $1,184 in July. The August figure is 55.4% below the July 2007 peak, DataQuick said.