Source : The Business Times, December 18, 2008
Foreclosed homes account for 54.6% of resale deals
(SAN FRANCISCO) November home sales in Southern California jumped 26.9 per cent from a year earlier as bargain-hunters snapped up foreclosed properties, but fell by 22.3 per cent from October, according to a report by MDA DataQuick released on Tuesday.
A total of 16,720 new and resale houses and condominiums were sold last month in the six-county region, the most heavily populated area in the state of California.
Properties that had been foreclosed at some point in the last 12 months accounted for 54.6 per cent of the transactions on resold homes in November.
'Bargains and bargain-hunters have kept this market alive through some of the bleakest financial news in memory. There's this renewed sense that you can score a 'deal' - something that had been missing for many years,' said John Walsh, DataQuick's president.
Sales of foreclosed properties helped push the region's median home price last month down to US$285,000, down 5 per cent from October and a record 34.5 per cent from November 2007.
Some of Southern California's home markets are among the hardest hit by foreclosures in the nation. 'Foreclosure resales' ranged from 44.1 per cent of November existing home sales in Los Angeles County to 70.4 per cent in neighbouring Riverside County.
'Last month's Southland (Southern California) sales weren't great, given they were the second-lowest for any November in 16 years. But they could have been a lot worse,' Mr Walsh said.
Since summer many of the region's inland markets, where the foreclosures are concentrated, have seen home sales double or more from year earlier levels as their home prices have tumbled.
Markets posting those increased sales have a median resale home price under US$260,000, or at least 35 per cent below year-earlier levels.
'Many first-time homebuyers are, understandably, cheering as foreclosures dominate sales, tugging down prices and raising affordability,' Mr Walsh said.
'For home sellers and the industry, though, one concern over foreclosures representing half of all sales is that those transactions simply repay lenders. They don't trigger a move-up purchase,' he added.
Home sellers in California had booked big profits earlier this decade amid the housing boom and routinely used them to buy more expensive 'move-up' homes, often new homes.
Now California's new homes market is struggling amid weak demand for housing in general and because aspiring new-home buyers lack money to buy, are having a hard time obtaining financing because of turmoil in credit markets or are waiting for prices to fall further.
The California Building Industry Association, which represents home builders, said in a report released on Monday that new home sales in October in California fell 63 per cent from a year earlier, marking 'some of the worst monthly statistics yet seen over the course of the housing downturn.'
The Commerce Department's report on Tuesday of November housing starts underscored the difficult market for home builders.
It said housing starts nationwide dropped 18.9 per cent to a seasonally adjusted annual rate of 625,000 units from 771,000 units in October, the lowest level since the department started collecting monthly starts data in 1959, and well below the 740,000-unit pace that Wall Street analysts had expected.
Economist Patrick Newport of IHS Global Insight expects double-digit declines for starts again in December and January because builders with viable projects are having a hard time obtaining credit and demand for new first and second homes is weakening further after the stock market's collapse.
'These are just horrible, horrible numbers,' he said, referring to November's housing starts. 'They're going to be quite a bit worse for the next couple of months.' - Reuters
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