Tuesday, Aug. 14, 2007 | The region’s housing market continues to slump as increased turmoil in the mortgage sector is leading some analysts to predict it will worsen dramatically in the coming months.
Last month, fewer homes sold in San Diego County than in any July since 1995, DataQuick Information Systems reported Monday. The median price, the midpoint among prices for the 3,106 homes sold, was $489,000 in July. That was a 2.2 decrease from July 2006 and a 5.5 percent decrease from the peak in November 2005.
The numbers come as the mortgage market has been squeezed dramatically in response to turmoil nationwide. In the last two weeks, major lenders have tightened regulations and raised the bar for consumers hoping to qualify for a loan — even for consumers with good credit.
The investors who once clamored to purchase bits of mortgages packaged into bonds have pulled back. Without that backing, lenders have spiked their rates on loans for more than $417,000. Those so-called jumbo loans make up about 20 percent of loans nationwide and a much larger share in regions like San Diego, where home prices for middle-class buyers reach well past the $417,000 threshold. Some analysts expect the rate spike to be temporary, until investors get their bearings about the tumult in the market.
But even a temporary spike in rates further restricts the pool of people able to qualify for loans, which dries up demand, slowing house sales further, said Andrew LePage, DataQuick analyst.
“That’s not going to show up in the numbers until next month,” LePage said. “I would anticipate a very weak August. Even if things loosen, there will have been a long pause.”
Despite that, the data bode poorly for real estate professionals attempting to convince buyers that now’s a great time to enter the market.
“With the market continuing to post the weakest sales in 10, 11, 12 years and growing, those who aren’t already in the market are just parking [themselves] on the sidelines,” LePage said. “They’re seeing more and more reasons to wait to see if the pendulum swings even more in their direction. There’s growing evidence that there’s more pain out there.”
Adam Rappoport, a local Realtor, said the uncertainty is keeping the would-be buyers out of the market.
“For the buyers tacitly thinking about getting into the market, this has priced them out,” he said. “They’re saying, ‘Hey, I’m going to sit back and wait.’ It definitely adds more fuel to the fire for psychology.”
The unconventional lending that swung the gate open for buyers who wouldn’t have normally been able to enter the housing market has swung nearly shut. Consumers with low credit scores could state their income and their assets without verification and obtain hundreds of thousands of dollars in loans for homes.
“Those deals are gone, gone, gone,” said Mark Goldman, a real estate financing consultant with Windsor Capital Mortgage Corporation.
But the difference between the most recent reports of trouble and those that hit a few months ago is that the mortgages affected now aren’t just those risky loans for poor-credit, or subprime, borrowers. Now, the affected loans include 30-year fixed mortgages — a synonym for stability among mortgage professionals.
“You know, these are standard, bedrock, conservative loans,” Goldman said. “And they’ve been hammered.”
But the effects of that tightening have yet to be seen.
“That’s what we don’t know — how long things are going to be seized up,” LePage said. “We know it’s going to have an impact. It’s exacerbating the current slowdown. It’s bad enough that we’re hitting a 12-year low” in sales.
With 624 homes or condos sold, new construction had its slowest month for sales since January 2003. That rate was a 26.2 percent drop from July 2006, when 846 new homes sold.
On the resale market, 771 condos closed escrow in July, a 2.8 percent decrease from the 793 sold in July 2006. The rate for detached houses slipped 12 percent, with 1,711 homes selling last month compared to 1,945 in July 2006.
Late Monday afternoon, there were 22,719 homes listed for sale on the Multiple Listing Service, according to online realty firm ZIPRealty. Rappoport said most sellers have yet to come to grips with market conditions.
“There is still a tremendous resistance by sellers to price aggressively,” he said. “It’s unfortunate. They’re going to learn the hard way.”