Tuesday, May 20, 2008

San Fernando Valley 2008 SRAR April Sales Report

The Southland Regional Association of REALTORS® has reported the first yearly increase in Single Family Home sales since September 2005. This months report of 547 SFH sales beat last years sales by 100 homes sold, a 22.3% increase. A more important statistic as far as a measure of future home sales is the large increase in pending activity which increased to 876 opened escrows from 655 the month before, clearly May sales will be higher than Aprils. Deals opened in March 2007 were affected greatly by the subprime explosion which occured during February and March and caused sales to drop very fast. The market recovered quickly as other lenders stepped into the subprime space but by August/September with the Alt-A blowup and the secondary mortgage market shutting down we have seen sales drop low and stay low for a historically long time. With foreclosures mounting and inventory rising pricing started to give significantly and we see the effect on the median price. Prices were falling before this point but due to vagaries of median prices it didn't show itself until all levels of the market were affected by the rise in lending standards.

The median Single Family Home stood at $637,000 in April 2007. For April 2008 the median price for a Single Family Home stood at $465,000. A staggering $172,000 drop. But in reality this was a combination of factors. Compositional shift in the homes that sold, smaller cheaper homes selling bringing the median down. A similar composition shift was in effect last year at this time with only the bigger more expensive houses selling while the low end of the housing market stagnated. The high end inventory is not moving well and what is moving is realistic sellers willing to negotiate under the terms offered by the buyers. Many of these sellers are dragged into this reality kicking and screaming, it is either a distressed sale (short sales) or a lender selling their foreclosures into the marketplace. It takes a very brave buyer to make a large financial purchase in a very fast falling market but the buyers are clearly out there making offers.

So while the San Fernando Valley was one of the few bright spots in Los Angeles County for April 2008 as far as sales volume it came at quite a cost. Even with the price drops sales are still abnormally low. Prices will go lower still as the market struggles to find an equilibrium point. I will attempt to break down the amount of "stress" in the marketplace later this month but I wanted to get a short report up on the local market while the data was fresh.

No comments: