Homes Sales Down in Southern California

Home sales dropped in Southern California in July as the housing market loses the momentum sparked by the federal and state tax credits for homebuyers

. The drop was the biggest year-over-year decline for the region in over two years. The median price fell for the second month in a row, as taxpayers continue to deal with high unemployment and sluggish growth in the economy.

The six county region (San Diego, Riverside, Los Angeles, Orange, San Bernardino, and Ventura) saw a total of 18,965 homes sold in July. It was the slowest selling July in the area since 2007, and the second-slowest since July, 1995, when just 16,225 homes were sold. Last month's totals were 27.5 percent lower than the July home-selling average of just over 26,000 homes among records that date back to 1988. The area typically sees home sales drop from June to July by a 6.6 percent average, about one-third the drop experienced this year.

June's year-over-year sales drop of 21.5 percent was the area's largest year-over-year price decline since March 2008, when sales dropped from the previous year by 41.5 percent. Analysts say that a number of sales that might've occurred in July were completed in May and June as Americans raced to beat the deadline for the tax credits.

The median price paid for homes in the Southland region in July was $295,000 in July, down from $300,000 in June and up more than 10 percent from the July 2009 median price of $268,500. The lowest median reported in the current cycle was $247,500 in April 2009 and the high came in at $505,500 in the middle of 2007. The The expansive peak to trough ratio can be attributed to a flood of low-cost homes on the market, including foreclosures and other distressed properties.

Foreclosures accounted for about 34 percent of housing sales in July, up from just under 33 percent in June and 19 percent last July. The all-time high in foreclosure to total sales ratio was 56.6 percent in February 2009. Homes purchased with FHA-backed loans accounted for 36 percent in July, compared with 39 percent in June and 39 percent last July. 22 percent of homes sold in the region were sold at $500,000 or more, compared with 19.2 percent in July of last year. The average share of homes in this price range over the last ten years was 25.5 percent.

Higher priced homes would likely be selling more if adjustable-rate mortgages (ARMs) and "jumbo loans" were easier to get. Since the credit crisis began about three years ago, lenders have adopted much stricter criteria for both types of loans. ARMs accounted for 6 percent of all home loans in July, down from 6.6 percent in June but significantly higher than the 3.3 percent share garnered by ARMs last July. Jumbo loans, or loans for more than $417,000, accounted for 18.5 percent of housing loans in July, up from 17.5 percent in June and 15.1 percent in July 2009. Right before the credit crisis began in August 2007, jumbo loans accounted for more than 40 percent of the market.

Homes Sales Down in Southern California

By: Ruth Mills

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