LAS VEGAS (Reuters) - Housing prices in Southern California fell to a two-and-a-half-year low in October and the region’s home sales slumped 45 percent from a year earlier as lenders issued fewer “jumbo” mortgages, according to a report released on Wednesday.
The median price paid for a home in Southern California in October fell to $444,000, down 8 percent from a year earlier and the lowest level since April 2005, according to the report by DataQuick Information Systems, a real estate information service.
The median price was down 3.9 percent from September, DataQuick said.
A total of 12,999 new and resale houses and condominiums were sold last month in Southern California — which includes Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties. Despite the decline from October 2006 sales, the figure marked an increase of 4.4 percent from September, the report said.
Southern California home sales financed with conforming loans, or mortgages for less than $417,000, have posted a normal seasonal decline of 20 percent since summer. By contrast, area home sales financed with loans greater than $417,00 have dropped by 60 percent, DataQuick said.
“Last month’s sales were the slowest for any October in DataQuick’s statistics, which go back to 1988,” the report said.
DataQuick President Marshall Prentice said prospective buyers remain on the sidelines amid the national housing downturn and a sustained slowing in Southern California’s housing market.
“A lot of potential buyers seem to be waiting this one out,” Prentice said in a statement. “It’s hard to buy a home when you think it might lose value, especially when you have to borrow money to do it.”
Prospective buyers also were held back because lenders clamped down on the jumbo mortgages routinely used to buy Southern California’s pricey homes. Lenders have turned skittish in the wake of subprime mortgage turmoil — even questioning business from borrowers with sterling credit.
Subprime loans were marketed intensely during the housing boom to the riskiest borrowers and now many are unable to pay their debt and are pushing foreclosure rates higher. That is roiling the broader mortgage industry.
Prentice predicted an increase in area sales as lenders loosen the financing spigot. “We can expect the issues with jumbo financing to slowly resolve themselves,” he said. “Meanwhile, demand is accumulating and when the market does level off, there will be a catch-up period.”
At a conference in Las Vegas, National Association of Realtors chief economist Lawrence Yun said interest rates on jumbo mortgages have dropped to 7 percent from about 8 percent in August, indicating lenders are less nervous and boding well for buyers in need of financing to purchase expensive homes.
“Whether it’s enough to improve home sales in California we’ll have to wait and see, but generally any time rates decline ... that tends to increase home sales,” Yun told Reuters during an interview.
DataQuick said the decline in median housing prices from a year earlier reflects both depreciation and a changed market mix, with fewer mid-to-high-priced homes selling with jumbo mortgages. The firm’s report said foreclosure activity is at record levels and financing with adjustable-rate and multiple mortgages is down sharply. Meanwhile, the size of down payments and “flipping,” or fast home sales by investors, are stable.
Editing by Andrea Ricci