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Southern California Homes Sales Plummet in July


Home sales plummeted in the six-county Southern California region in July, sparked by the expiration of federal tax credits for homebuyers. Analysts say that June's numbers were inflated by buyers rushing to qualify for the tax credit. The median price for homes sold in the area, meanwhile, was $295,000, down slightly from June, but still 10 percent higher than the median from July 2009. Prices have risen on a year-to-year basis every month this year except April, when prices dropped 1 percent.

This trend, according to analysts, will not continue. The median price was deflated during the first half of 2009 by a wave of distressed property sales in cheap inland markets. The median is the mid-point, meaning half of all homes sold were valued higher and the other half for less, so the flood of low-priced homes dragged the median down. As sales in higher-priced regions grew in the latter months of 2009, the median came back up. Obviously, average prices are similarly affected by a rise in sales activity of either low-end or luxury homes.

In total, 18,945 homes were sold in the Southland region in July, a drop of 20.5 percent from June and 21.5 percent from last July. Again, the drop can be attributed to the expiration of tax credits. Buyers who just beat the April 30 deadline to sign a purchase agreement closed in May and June, affecting the sales totals for both months. Foreclosures accounted for about 34 percent of existing homes sold, up slightly from 33 percent in June and down from 43.5 percent last July.

Some analysts are encouraged by a recent spike in investors buying property. Nearly 22 percent of homes sold in the region in July were to absentee owners with the intent of re-selling or renting. With the stock market other investment vehicles stabilizing, investors are expected to turn to real estate in greater numbers through the end of the year, as banks continue to try to unload bloated real estate portfolios obtained through foreclosing on bad loans.

Despite low prices and interest rates hovering around record-lows, sales are being stifled by weak consumer confidence and an unstable job market. Inventory has nearly doubled in the real estate market since February. The Obama administration had asked lenders to hold off on foreclosures last fall to stabilize the freefall in prices and, for the most part, they had complied until earlier this year. In addition to weak consumer confidence and rising numbers of unemployed Americans, lenders have tightened standards, all of which prompts analysts' predictions that prices will remain low through the end of the year.