by Calculated Risk on 11/17/2009 02:11:00 PM

From DataQuick: Southland home sales up again, drop in median price smallest in 2 years

Southern California home sales rose in October as prices showed more signs of firming. The median sale price fell by the smallest amount in two years, the result of a shrinking inventory of homes for sale and government and industry efforts to stoke demand and curtail foreclosures ...
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Last month 22,132 new and resale houses and condos closed escrow in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was up 2.8 percent from 21,539 in September and also up 2.8 percent from 21,532 a year earlier, according to MDA DataQuick of San Diego.

October marked the 16th month in a row with a year-over-year sales gain, although last month’s was the smallest of those increases. ...

Sales increases over the last two months can be partially attributed to the recent increase in short sales, which take longer to close escrow. The result is that some summer deals that might normally have closed earlier instead closed in September and October. ...

[also] A rush by some to take advantage of the federal tax credit for first-time buyers ...

FHA mortgages accounted for 38.3 percent of all Southland purchase loans last month, compared with 32.5 percent a year ago and just 2 percent two years ago. ...

“The government is playing a huge role in stabilizing and, to some extent, reinvigorating the housing market,” said John Walsh, MDA DataQuick president. “Its actions have triggered ultra-low mortgage rates, plentiful low-down-payment (FHA) financing, an extended and expanded tax credit for home buyers, and programs and political pressure aimed at reducing foreclosures.”

“The real question now is how well can the market perform next year as some of the government stimulus disappears,” he continued. “The more upbeat outlooks suggest a strengthening economy and job market will help pick up the slack, and that demand for lower-cost foreclosures will remain robust. The more negative forecasts assume, among other things, a much slower economic recovery, more foreclosures than the market can readily digest, and more turbulence in the credit markets.”

The latter outlook suggests today’s market stability is contrived and will prove short-lived – nothing more than a temporary price plateau – while the former suggests home prices are currently at or near bottom.
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Recent month-to-month and year-over-year gains in the median sale price reflect, in large part, a shift of late toward foreclosures representing a lower percentage of sales. It’s mainly the result of lenders and loan servicers increasingly steering distressed borrowers into either an attempted short sale or loan modification. This reduction in foreclosures is key because over the past two years foreclosed properties were often the most aggressively priced on the market.

Last month, foreclosure resales – houses and condos sold in October that had been foreclosed on in the prior 12 months – made up 40.6 percent of all Southland resales. That was up insignificantly from 40.4 percent in September and down from a high of 56.7 percent in February this year.

As sales of lower-cost foreclosures began to wane earlier this year, sales in higher-cost neighborhoods picked up. High-end homes began to account for a greater share of all sales and helped reverse the steep slide in the median price. Over the past few months, however, the high-end’s share of total sales has flattened out.
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Foreclosure activity remains high by historical standards, although mortgage default notices have flattened out or trended lower in many areas lately.
emphasis added

DataQuick does a good job of describing the uncertainties concerning the housing market.

The increase in FHA insured loans is amazing: from 2% in 2007 to 39.3% last month.