New data show price declines easing in big cities, sales of new homes improving nationally and foreclosures in California dropping to levels not seen since before the start of the credit crunch nearly five years ago.
The easing of foreclosures is seen as key by many economists, since the glut of these properties being sold at a discount has been a significant drag on home prices.
“The foreclosure market is turning into a drought, not a wave, and that has resulted in a lack of inventory,” said Sean O’Toole, chief executive of ForeclosureRadar.com. “If it continues, it will likely mean that we’ve either seen a bottom—or have passed a bottom—in prices because of limited supply and still strong demand.”
Home prices remain depressed from their peak in 2007, when the median-priced home in Southern California sold for $505,000. The median price last month was $280,000.
The economy overall has been improving, however, with unemployment, retail sales, corporate profits and other measures showing steady if unspectacular gains. Housing has been one of the last holdouts, but analysts note that prices have stabilized and sales volume has been gaining.
“What are important are sales and inventory, and those are pointing in the right direction,” says Christopher Thornberg, a principal at Beacon Economics who was one of the early callers of the housing crash. “I would say that by the end of the year, they should translate into better prices.”
Thornberg adds, “The recovery is here.”
Notices of default, the first step in the foreclosure process, fell to 56,258 statewide in the first three months of the year, a 17.6 percent drop from the same period last year, DataQuick of San Diego reported Tuesday. That was the fewest number of default notices filed since the second quarter of 2007.
Banks still retain many foreclosed properties on their books, and some analysts have predicted that housing prices could weaken again if lenders dump these properties into the recovering market. But O’Toole and other analysts see that long-feared “second wave” as increasingly unlikely, pointing out that the banks would be acting against their own interests by undercutting prices through a fire sale.
“A few years back, there were some breathtakingly negative forecasts making the rounds regarding the foreclosure problem,” DataQuick President John Walsh says. “It’s not necessarily playing out the way some pundits thought.”
Low interest rates and the availability of bargain-priced properties are drawing more buyers into the market.
Bobbie Dunlap, 61, an office manager, said she recently bought a bank-owned home for $225,000 that she intends to fix up and rent out. The South Gate, Calif., resident had to raise her price to beat competing bids on the two-bedroom property in nearby Bellflower. She hopes that the rental income from the investment will provide her with a financial cushion when she stops working.
“It is in pretty good shape, but it still needs some extra work, of course,” Dunlap says.
Betting on the rebound, investors made up a record share of buyers in Southern California during the first two months of the year, according to DataQuick. As more foreclosed homes in hard-hit neighborhoods are filled with renters, an increasing number of everyday buyers will grow interested in owning, said Ivy Zelman, chief executive of Zelman & Associates, a New York housing research firm.
“This is not a robust recovery, but I feel confident that we are not sitting here lingering,” says Zelman, who predicts that home prices will end the year up about 1 percent. “There really is more meat to the bone.”
Several factors continue to hold back a major turnaround in housing, including a weak job market, tight mortgage lending standards and the huge number of homeowners who owe more on their mortgages than their homes are worth, leaving them essentially stuck in their properties. And the absence of a major housing recovery is likely to hold back the broader economy.
“Housing generates a ton of jobs and income. However, I don’t think the housing recovery is going to be nearly as robust this time as it has been in prior cycles,” said Christopher Low, chief economist for FTN Financial. “The bubble started with froth in local markets and then spread out to a national level; the recovery is going to come in local markets and eventually spread and become a national phenomenon.”
Other new housing data also point to a fledgling recovery.
New-home sales nationally fell 7.1 percent in March from the previous month, the Commerce Department said Tuesday, but that was partly because it revised February sales figures up significantly. Even though the figure for March was the lowest since November, overall sales of new homes are up about 16 percent for the first three months of the year compared with 2011, the department said. The report helped boost the Dow Jones industrial average 74.39 points to 13,001.56.
That improvement means that new-home sales will probably be stronger than last year’s, which were the worst on record.
One of the most widely watched measures on home values, the Standard & Poor’s/Case-Shiller index of 20 U.S. cities, showed price declines moderating from January to February. Prices fell 0.8 percent from January to February, and were down 3.5 percent from February 2011. Los Angeles fell 0.8 percent in February from the previous month, while San Francisco was down 0.7 percent. San Diego was slightly positive, up 0.2 percent from January.
Many economists brushed off the decline as the Case-Shiller numbers capture the traditionally slow months of January and December, as well as February, because they average three months’ worth of data. The index’s year-over-year decline in home values has also been steadily shrinking in recent months.
(Times staff writer Lauren Beale contributed to this report.)
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