Firm: Southern California home sales drop 13.8 percent, marking slowest August in 3 years

By Jacob Adelman, AP
Wednesday, September 15, 2010

Home sales drop 13.8 percent in August in S. Calif

LOS ANGELES — Home sales in Southern California plunged 13.8 percent last month to mark the slowest August in three years, as the weak job market and a lost sense of urgency among shoppers curbed activity, a tracking firm said Tuesday.

A total of 18,541 homes sold in the six-county region last month, compared with 21,502 in August 2009, San Diego-based MDA DataQuick said.

Sales reached the lowest level for the month since 2007, but the decline was not as severe as the 20.6 percent year-over-year drop in July.

August’s sales were also down 2.1 percent from 18,946 in July.

DataQuick also said the median home in August of $288,000 climbed only 4.7 percent from $275,000 in August 2009, its slimmest gain in a string of year-to-year increases that began in December.

Last month’s median price also fell 2.4 percent from $295,000 in July, its third consecutive month-to-month drop.

The end of the federal tax credit for prospective homebuyers was largely to blame for weak sales during the past two months, as were job security fears, said G.U. Krueger, principal economist at research and consulting firm Inc.

“On the surface, you get kind of this ‘Oh my God’ feeling” from the sales number, he said. “But in reality, the decline in value doesn’t come really unexpected.”

Mike Novak-Smith, a real estate broker who specializes in foreclosure sales in Riverside and San Bernardino counties, agreed that the loss of the federal incentives were partly to blame for the drop in sales. But the main culprit was a lack of inventory, he said.

Cash-strapped families are staying put in their current homes instead of trading up into bigger or nicer places, which is keeping a supply of entry-level residences off the market, where Novak-Smith believes they’d be snapped up quickly.

“The business itself is starving from a lack of marketable inventory,” he said.

Southern California had six months worth of unsold homes in July 2010, according to the most recent figures from the California Association of Realtors. The figure was down from 18.2 months near the peak of the economic downturn in September 2007.

Krueger said the dip in pricing was relatively modest in light of the sales decreases.

“So far, the price erosion that usually comes with a significant decline in volume is still relatively under control,” he said. “The underlying supply conditions are still not signifying any kind of major downward pricing pressure.”

Some potential buyers appear to be waiting for further price decreases, despite the availability of near-record low mortgage rates and banks that are slowly growing more willing to lend, DataQuick president John Walsh said.

“Over the next couple of months it will be interesting to see how many home shoppers opt for the sure thing, a spectacularly low mortgage rate, and how many hold off in hopes prices fall significantly,” he said.

Foreclosures comprised 34.7 percent of resales last month, up from 34.2 percent in July but down from 41.7 percent a year ago.

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