California Foreclosures Driving Sales

You need only two things to fix the housing crisis: Readily available consumer credit, and lower real estate prices.

The second part of that equation is being helped along by Foreclosures:

Southern California home sales rose 51 percent in December as a surge in foreclosures pushed prices of single-family houses and condominiums down from a year earlier, MDA DataQuick said.

A total of 19,926 new and existing houses and condos sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 13,240 a year earlier, the San Diego-based research company said today in a statement. The median home price in the region fell 35 percent to $278,000…

Foreclosures, which often sell at steep discounts, lured buyers as President-Elect Barack Obama worked on plans to revive the housing market using the second half of the $700 billion Troubled-Asset Relief Program. Lenders including Bank of America Corp., and financial institutions such as Goldman Sachs Group Inc. benefited from the government’s initial distribution of bailout money as their mortgage-related assets plunged in value.

Foreclosed homes accounted for 56 percent of Southern California’s December sales, more than double the amount a year earlier, MDA DataQuick said. Such transactions made up almost 70 percent of sales in Riverside County, where the median price plummeted 41 percent to $209,000. Sales jumped 77 percent to 4,435, MDA DataQuick said.

The median price for all of Southern California plunged as a smaller proportion of properties changed hands near the coast and more were sold inland in areas including Riverside and San Bernardino, where mortgage defaults have surged.

The bottom in Housing won’t be in until prices come closer to historical means. One of the factors driving pricing is the ongoing foreclosures.

I don’t have any problem with the government engaging in assistance to those people who 1) did not engage in reckless behavior; 2) can reasonably afford their homes with a modest modification.

It is unfortunate, but for most of the homes foreclosed upon, there aren’t many other options.

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Source:
Southern California Foreclosures Push Sales Higher
Daniel Taub
Bloomberg, Jan. 19 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9tuBSHCY5JM&

See also:
Banks Foreclose on Builders With Perfect Record
JOHN COLLINS RUDOLF
NYT, January 19, 2009
http://www.nytimes.com/2009/01/20/business/economy/20builders.html