Saturday, September 17, 2011

$982 Monthly Payment for Aug. Home Buyers in California Is Lowest On Record, 64% below 2006

Typical Mortgage Payment for Homes Sold in California:
 August 2011    June 2006   April 1989 
$982 $2,758 $2,237

From DQ News:

"An estimated 37,734 new and resale houses and condos were sold statewide last month. That was up 8.8% from 34,695 in July, and up 10.2% from 34,239 for August 2010. An increase from July to August is normal for the season. California sales for the month of August have varied from a low of 29,764 in 1992 to a high of 73,285 in 2005, while the average is 48,344.

The median price paid for a California home last month was $249,000, down 1.2% from $252,000 in July, and down 4.2% from $260,000 for August a year ago. The year-over-year decrease was the 11th in a row after 11 months of increases. The bottom of the current cycle was $221,000 in April 2009, while the peak was $484,000 in early 2007. 

Distressed property sales continued to make up more than half of California’s resale market last month. Of the existing homes sold last month, 34.6 percent were properties that had been foreclosed on during the past year. That was up from a revised 34.5 percent in July and down from 35.6 percent in August a year ago. The all-time high was in February 2009 at 58.5 percent. 

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.8% of resales last month. That was up from 17.3% in July and down from 18.0% a year earlier. Two years ago short sales made up an estimated 14.3% of the resale market.

The typical mortgage payment that home buyers committed themselves to paying last month was $982, the lowest on record (see chart above). That was down from $1,027 in July, and down from $1,045 in August 2010. Adjusted for inflation, last month's mortgage payment was 56.1% below the spring 1989 peak ($2,237) of the prior real estate cycle. It was 64.4% below the current cycle's peak in June 2006 ($2,758)."

MP: The monthly mortgage payment data above are pretty amazing.  Compared to 2006, the typical California first-time home buyer today saves more than $21,000 annually in housing costs (adjusted for inflation).  We hear all the time that median household income is flat or falling, but that doesn't account for the significant savings in housing costs in states like California, at least for some home buyers, especially first-time buyers.  Even with no change in median income, some recent, first-time home buyers are experiencing the equivalent of a $21,000 increase in real income compared to 2006.      

7 Comments:

At 9/17/2011 10:01 AM, Blogger morganovich said...

mark-

that only matters if you are a first time buyer or have the ability to refi, which most do not.

new mortgages and refis are tracking at very low levels..

 
At 9/17/2011 11:11 AM, Blogger rjs said...

if houses aint selling now, what happens to home prices if interest rates go up?

 
At 9/17/2011 11:24 AM, Blogger Mark J. Perry said...

RJS: Note that home sales are UP from the previous month, and the same month a year ago.

 
At 9/17/2011 12:25 PM, Blogger Benjamin said...

It is a great time to be a real estate buyer, commercial or residential in CA.

Office buildings in downtown Los Angeles now sell for one-half of what they did, in nominal dollars, in the mid-1980s.

This is inflation?

 
At 9/17/2011 4:46 PM, Blogger morganovich said...

mark-

i don't know what data you are looking at to make that "up" claim, but the NAR existing home sales figures sure don't look too great:

http://cr4re.com/charts/charts.html?Existing-Home#category=Existing-Home&chart=EHSJuly2011.jpg

california may be doing a little better, but nationally, existing home sales are trending down and are barely above the 2008 lows and around 30% off the peak.

new home sales are even worse.

we're seeing a sharp contraction in architectural billings as well.

http://cr4re.com/charts/charts.html?CRE#category=CRE&chart=ABIJuly2011.jpg

the mortgage purchase index is at levels from 1995, and refis are not much better.

low mortgage rates are not driving much buying or refi activity.

this seems to point to either a serious demand problem (likely due to over leverage, underwater mortgages etc) and a market issue around lending standards which are keeping many from taking advantage of such rates.

 
At 9/17/2011 5:13 PM, Blogger PeakTrader said...

For every buyer who gains, there's a seller who loses.

Is it really good construction workers are collecting unemployment benefits (for years) or working at McDonalds instead of building houses?

 
At 9/17/2011 9:40 PM, Blogger VangelV said...

MP: The monthly mortgage payment data above are pretty amazing. Compared to 2006, the typical California home buyer today saves more than $21,000 annually in housing costs (adjusted for inflation). We hear all the time that median household income is flat or falling, but that doesn't account for the significant savings in housing costs in states like California. Even with no change in median income, some recent, first-time home buyers are experiencing the equivalent of a $21,000 increase in real income compared to 2006.

Most homeowners who have a mortgage are underwater. The low payments do not help if refinancing is not available. I suspect that the decline comes from the huge volume of ARM written near the peak of the bubble. The government is simply using Fannie and Freddie to make sure that when they reset people will not walk away. While that may help borrowers it will cost the taxpayers who are backing all of the crappy mortgages a bundle.

 

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