Friday, October 24, 2008

San Fernando Valley September 2008 home sales report

Septembers sales report is out for the San Fernando Valley. SFH sales came in at 658, down 1.20% from the month before and up 81.77% from the same month a year earlier. This "strength" in sales comes as median price fell to $392,500, down 7.65% from the month before and down 37.07% from the same month a year earlier. Last year at this time the full force of Countrywide and all other lenders switching over from a Wall Street model to a Fannie/Freddie/FHA model hit the market. Fannie and Freddie still had ultra loose guidelines and stated income available at that time. This is what ground sales to there lowest levels in history. Now with prices dramatically falling the best the market can muster is a month which is the third weakest showing for September in history.

Condo sales came in at 211, up 22.67% from the previous month and up 36.12% from the year before. Median price for condos fell 5.45% from the month before and are down 33.33% from the year before period. One thing to remember about condo supply is that it has greatly increased in the boom years and it will be hard to match the sales low of the 90's.

Total Pendings for September are at 1,305, their strongest month of the year. See my previous post regarding the large amount of fallout in the market as to why this might not be as strong of a sign as it would be in normal times. I think the elimination of FHA seller assisted down payment on Oct 1st (one of the last bastions of 100% financing) and all major mortgage insurers backing away from California financing greater than 90% will start affecting sales after this month (people still have locks on old loans and can close under the looser guidelines until those expire). I haven't even mentioned the local and national economic turmoil which is another issue entirely.

I'll give a forecast for October sales on November 2nd and will update pendings and inventory this weekend.


Noz said...

What do you think of the big gorilla in the room? The Alt-A loans due to reset....why is no one talking about these?

You also have complete utter liars and idiots like Jim Link, the Van Nuys-based Southland Regional Association of Realtors saying crap like this:

Link expects that foreclosed properties will dominate the Valley's market in the coming months, which is an encouraging sign.

"Recent sales activity and the number of properties already in escrow suggests that the market has hit bottom and is bouncing back," he said.

He's a Realtor....or associated with them. Isn't it in their nature to lie?

Effective Demand said...

Unfortunately the local trade association has never said anything other than now is the time to buy. Their credibility is shot because of it. Last year at this time Jim was saying that home prices wouldn't fall.

As for the bottom, It is all about your definition of the bottom. A bottom in terms of sales has been reached but a price bottom has a long way to go.

Noz said...

What do you think of the upcoming Alt-A resets?

Effective Demand said...

Well I won't call them a non-event but I think the issue with Alt-A isn't interest rate resets it is the lack of amortization (either IO or neg-am) and/or the overstating of income in order to get the loan. Since these are systemic problems inherent in the loans from the beginning I think Alt-A reset issue is more just the "Alt-A" issue. To many bad loans in the market to people with good Ficos (the only real difference between subprime and Alt-A).

The loans will continue to go bad at a higher and higher rate as people realize their situation or reality forces their hand. Servicers can help mitigate resets but they can't do much for massively underwater individuals who have no way of paying off their loan. Unless we see investors willing to take large principal writedowns defaults will surge. Note, people may stop paying but you might not see NOD rise. I think the political pressure to keep foreclosures down will mean short sales will rule the day the next 3 or 4 years.

Noz said...

Thanks for your input....interesting viewpoint.

I agree with you though. It really doesn't matter how we get to the bottom..I just hope we do. I am very much against anyone of these idiots getting bailed out.