Southern California’s housing market couldn’t shake off the doldrums in February despite record demand from investors and all-cash buyers.
The median home price increased 1.9% in February from January to $275,000. That was unchanged from the same month a year earlier, according to DataQuick Information Systems of San Diego.
Sales remained weak, declining 0.6% from January and down 6.4% from February 2010.
With the spring selling season approaching, many real estate professionals found little reason for optimism.
“I don’t see any basis for prices to climb at this point,” said Glenn Kelman, chief executive for the online brokerage site Redfin. “I am not one of those people who think they are going to fall much further. What I am mostly worried about is just the stalemate. The buyers we are talking to are just frustrated. They feel that there is nothing good to buy.”
Robert Kleinhenz, deputy chief economist with the California Assn. of Realtors, said that aside from their concerns over the direction of the economy, potential buyers face difficulties getting a mortgage.
“When they finally get around to looking seriously at a home and wanting to make an offer, they have difficulty finding financing,” Kleinhenz said. “The trouble with trade-up buyers — they may have lost equity because home prices have fallen.”
Although the sales pace remains sluggish, it would not take much to see an improvement, DataQuick analyst Andrew LePage said.
“There is a lot of pent-up demand,” LePage said. “If the economy can improve and people begin to feel more confident about their employment situations, then sales could increase significantly. It’s easy to go up from here.”
Cash-rich investors are likely to continue to constitute a big part of the market in coming months because these buyers can close deals faster than regular buyers, who must wait for their loans to be approved by banks.
In Southern California last month, the number of distressed sales — the combination of foreclosures and short sales — accounted for well over half of the market for previously owned properties, DataQuick said.
Foreclosures made up 37.1% of the market and short sales 19.8%. Absentee buyers — mostly investors and some second-home purchasers — bought a record 26.1% of Southland homes sold in February, paying a median $198,000. Buyers who paid cash accounted for a record 31.7% of February home sales, paying a median $200,000.
Investors scooping up properties at low levels are keeping prices down.
Stan Humphries, chief economist at Zillow.com, said the main reason the median home price that DataQuick publishes had not fallen further was because more sales were occurring in higher-priced neighborhoods. The proliferation of big-ticket sales boosts the median price — the point at which half the homes sold for more and half for less — disguising that values are actually continuing to fall, he said.
“The January and February sales data can be interesting, but we always caution that historically they’ve been a poor barometer for the rest of the year. What the past two months do tell us is that lots of people have bet, often with cash, that housing at today’s prices will prove a solid investment,” said John Walsh, DataQuick president.
“This spring we’ll see an infusion into the market of more traditional buyers, who aren’t necessarily purchasing with an investor mindset. If the stars line up right – low prices, low mortgage rates, available credit, higher job growth and higher consumer confidence – we could see sales shoot back up to more normal levels. There’s pent-up demand out there. Lots of people have been waiting for the right time to buy. But they’ve got to feel more confident in their jobs, they’ve got to qualify for a loan and, for some, they need to be convinced prices are at or near bottom. One group will still be stuck on the sidelines, though: Those who owe significantly more on their mortgages than their homes are worth.”