Home sales drop in California
April 17, 2013
• But non-distress sales rise
• “Government intervention has significantly distorted the housing market”
Total home sales in California last month, including both distressed and non-distressed property, fell 12.9 percent compared to March 2012, according to figures compiled by ForeclosureRadar Inc., of Truckee, formerly of Discovery Bay.
It notes that the calendar may account for part of the decline with Easter hitting this year on March 31 while in 2012 it was not celebrated until April 8.
But, says ForeclosureRadar’s new report, first quarter sales came in at their lowest since 2008.
In addition to an overall downturn in sales, the mix of properties for sale in March changed markedly, it says.
Non-distressed sales increased to 62.9 percent of total sales last month, up from 48.8 percent and 50.8 percent in January and February, respectively, the report says.
While still a large portion of the market and nearly four times the pre-housing crisis average, distressed property sales in March saw a sharp decline to 37.1 percent of total sales, the report says.
“While many state that the lack of inventory will cause housing prices to jump 20 percent or more this year, I believe the increase in home prices will be constrained by lack of market activity, appraisals that lag market prices, affordability and return on investment,” says Madeline Schnapp, director of economic research for ForeclosureRadar.
“Regardless, rising prices are here to stay near-term and present an opportunity for both buyers, Realtors and investors who are willing to recognize that the time frame for the best return on investment is probably sooner rather than later,” she says.
Rising home prices will help lift a certain percentage of underwater homeowners into a state of positive equity and into a position where they could choose to sell, the report says. If they choose to sell, these homeowners will help alleviate some of the current inventory problem, while also increasing sales activity.
According to how ForeclosureRadar sees it, if home prices were to increase by 10 percent, an estimated 415,000 homeowners, or 23 percent of negative equity homeowners, would be returned to a positive equity state. And if home prices went up by 20 percent, an estimated 715,000 homeowners, or 40 percent of negative equity homeowners, will transition to a positive equity state, it says.
“While there are several reasons why California home prices are rising so quickly, the most dominant is government intervention,” says Sean O’Toole, ForeclosureRadar founder and CEO.
“Government intervention has significantly distorted the housing market by constraining supply and keeping mortgage interest rates artificially low. While many state that the lack of inventory will cause housing prices to jump 20 percent or more this year, I believe the increase in home prices will be constrained by availability of credit, appraisals that lag market prices, affordability and return on investment,” Mr. O’Toole says.