Thursday, 17 September 2009

Sign of 2nd Dip? So CA Aug 2009 Real Estate Sales Data

Data Quick, real estate information service company, has announced August 2009 sales data in Southern California.

"Southland home sales fall; median price edges up again"

Key points are:

- Total transaction is 21,502, down 10% from July 2009 (usually transactions in August are higher than that of July.

- 21,502 transactions are smaller than average transactions of last 20 years (27,458).

- Key reasons are 1) inventory of distressed properties has gone down, 2) uncertain economic condition & 3) median sales price has been increasing since April.

- Share of REO (bank owned property) is 38.8%, down from 40.7% in July and 56.7% in February 2009.

- Median sales price was $275,000, up 2.6% from $268,000 in July and from $247,000 in April 2009 (the peak median price was $505,000 in mid 2007).

- Share of FHA mortgage is 37.4% (24% nationwide), up 10 points from August 2009.

I believe real estate markets in former bubble area like CA/NV/AZ/FL is facing "mini-bubble" from first time home buyers. However, as I pointed out in previous posting, real estate markets in former bubble area might face "second dip" in near future.

Below is possible problems:

- Due to lack of reserve fund and mounting defaults, qualification of FHA loan is getting tighter.
- $8000 First Time Home Buyer Tax Credit expires on November 30th 2009.
- 23% of mortgage holders nationwide have negative equity (approx. 40% in California).
- Banks are accelerating foreclosure.
- Possible "shadow inventory" of distressed/REO homes in millions.

While this analysis is about Southern California, August 2009 Bay Area real estate transaction has gone down by 14.8% Vs. July 2009. I think you can see same transaction trend in other former bubble markets such as Las Vegas and Phenix. Let's see if "second dip" will happen or not!

Happy Investing!!!

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