Lower Foreclosed Home Prices Push Sales Up in California

Lower foreclosed home prices pushed house sales up in Southern California in October, based on data from a real estate company based in San Diego.

A total of 22,132 newly-built and existing homes in Southern California were sold in October, up by nearly 3 percent from the 21,539 homes sold in the previous month and up also by almost 3 percent from the 21,532 units sold in October last year.

Out of these more than 22,000 residential units sold, almost 41 percent were lower-priced foreclosure properties that have been repossessed over the past several months. The percentage of foreclosure sales dropped from the peak percentage of 56.7 percent reached in February, but the percentage in October was still high.

According to Southern California housing analysts, the increase in home sales was driven largely by two factors: the attractive prices of foreclosure homes and the November 30 expiration of the federal tax credit. They said that a lot of first time house buyers rushed to beat the tax credit deadline.

Earlier this month, the tax credit was extended and expanded, giving renewed hopes of increased foreclosed home sales and other types of house sales in the coming months.

Because of the increased volume of sales in Southern California in October, home prices also increased. The median sales price for all types of houses in Southland rose to $280,000, an increase of nearly 2 percent from the September median of $275,000, but down by almost 7 percent from the $300,000 median in October 2008.

Although the median sales price declined again in October on a year-over-year basis, the decline was the smallest compared to other annual declines since September 2007, when home prices began their monthly declines as the foreclosure crisis worsened.

In the counties of Orange and San Diego, median home sales prices also increased on a year-over-year basis, with Orange County posting an increase of almost 4 percent to $436,500 and with San Diego County posting an increase of 0.5 percent to $325,000.

The October median home price increase was the second straight increase for Orange while it was the first increase for San Diego in more than 3 years.

According to the head of the research firm, the direction of home sales and prices in the coming months is crucial because it will indicate if the nascent recovery of the housing market from foreclosed home inventories will continue into December and the next year.