If you haven't read the latest report from LA Times, here it is: http://www.latimes.com/business/la-fi-home-sales20-2010jan20,0,3261823.story?track=rss
On one hand, we should acknowledge that it is, ultimately, a good sign that home sales increase. However, there were some very specific factors that I believe caused the increase. Factors that will not exist anymore in the coming months and may set bullish minded real estate analysts up for disappointment.
Before I continue, let me say that there are definitely a few VERY POSITIVE TRUTHS to note in the LA Times article. Namely:
1) The interest rates really are rock bottom right now. In that regard, GREAT reason to have bought in December.
2) As Chris Cortazzo at Coldwell Banker says: We are having a lot of cash deals, so there is a lot of money out there, and there is amazing opportunity and great deals to be had " There are great deals out there for buyers who are aggressive and have cash.
Unfortunately, the December increase may turn out to be more of an anomaly then a trend. As I mentioned there were some very specific factors that led to the increase in the December median price that we simply cannot expect in the first few months of 2010.
First, you need to know that the foreclosure market was put on a major halt late last year, suspending their action for the holiday season. This softened their impact on home prices in December.
As a result, the sales prices of single family homes and condo units climbed up on a year-over-year basis.
Based on data from New York-based real estate research firm HomeData, the median sales price for a single-family home in December was $348,000, marking a jump from the November median of $339,000 and from the December 2008 median of $345,000.
The median sales price of condo units was $315,000, an increase from the November median of $305,000 and the December 2008 median of $310,000.
The total number of houses sold in December 2009 was higher by 30 percent than December 2008, although it was lower by around seven percent than November 2009.
Analysts have been encouraged by the price and sales improvements, but they are concerned that the improvements are only temporary because of the forbearance efforts by lenders.
Christopher Thornberg, chief analyst for Los Angeles-based real estate consulting firm Beacon Economics, said that the drop in Los Angeles foreclosed homes for sale in December was only temporary because lenders just suspended their foreclosure actions during the holidays. It is expected that they will continue to pursue home and land foreclosures in the first months of the year.
Thornberg added that the federal tax credit, the low mortgage rates and other federal policies are temporarily propping up the housing market. He reiterated that existing home and condo foreclosures need to be absorbed before new foreclosures enter the market so that property prices do not plunge further.
Meanwhile, based on data from another research firm, default notices in California fell by almost 18 percent in December, after dropping by more than 32 percent on a daily basis, as lenders suspended their foreclosure actions. Fannie Mae, sister company Freddie Mac and Citigroup are among those which suspended their foreclosure acquisitions and evictions.
Foreclosure auction sales were also temporarily suspended, as auction sales dropped by 3.5 percent on a daily basis. With these suspensions, research firms said that foreclosure figures in December did not represent housing sector realities, considering that mortgage defaults increased in November and in December.
In the LA Times article, Chris Cortazzo mentioned that Spring sales are going to start early this year. He is right.
Many of these are foreclosures that have been waiting to hit the market, and surely this year, there are going to be a lot of great opportunities for bank-owned properties and regular sales alike - No property is immune from the stigma of being the over-priced home in the neighborhood. We are already seeing an influx of new, well priced properties hitting the market this year, and I'm optimistic about the buyer's market continuing through the spring.
All the Best,
Jerry Hsieh
310-228-8856
