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Home Prices Rise 8.6% in Southern California

Home Prices Rise

Home sale prices in Southern California showed new energy in January, bouncing 8.6% from the same month one year earlier — a period when the market was inundated with steeply discounted bank-owned properties.

 Compared with a very strong December, the median fell 6.1% to $271,500 in January, ending eight consecutive months of price appreciation or stability in the Southland, MDA DataQuick, a San Diego real estate research firm, quoted Tuesday.

The month-to-month decline was likely in part to the higher percentage of cheaper Inland Empire homes that sold in January compared with December as buyers in pricier areas stopped searching during the holidays and investors and first-time buyers made up a larger share of shoppers.

Results from the first two months of the year don’t always provide an indication of what will happen for the rest of the year.

 Many experts fear the market will suffer after the government ends programs which have helped the market on the road to recovery.

The Federal Reserve plans next month to end a $1.25-trillion program that has helped keep interest rates at rock-bottom levels by purchasing mortgage bonds from Fannie Mae and Freddie Mac.

The Federal Housing Administration, which has backed mortgages for many first-time buyers, is expected to tighten its lending rules later this year. An extended federal tax credit of up to $8,000 for first-time home buyers and up to $6,500 for some current homeowners will expire April 30.

Some analysts expect the market to get another boost as the tax incentive expiration nears. But as the federal measures unwind, the housing market will be burdened by high job losses and foreclosures.

“Beyond the spring, everything will depend on what is going to happen with those delinquencies. Are they going to turn into foreclosures or notices of default? And what are the banks going to do with them once they have them?” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “There will be very significant pressure on the banks to behave reasonably . . . and then it is anybody’s guess what happens after the midterm election.”

Many real estate agents and experts are hoping for an early spring shopping season, given the tax credit and low interest rates, but say a lack of new foreclosures has slowed the sales pace. A total of 15,361 homes sold in Southern California in January, an increase of only 0.9% over the same month a year earlier when the market for lower-end, bank-owned properties began to take off, DataQuick said.

We are definitely noticing the lack of inventory out there for our buyers at this time. All the good deals are just being snapped up instantly by the investors.

Sales dropped 31.2% in January compared with December. A decline between those two months is normal; on average, sales have fallen 28.4% in that period every year since DataQuick statistics began.

The number of foreclosures as a percentage of the resale market ticked up slightly in January. Foreclosure resales made up 42.1% of all sales of previously owned homes in Southern California, up from 39.6% in December but down from 56.4% in January 2009.