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Erika Kauzlarich-Bird: Home equity sales highest in four years

Real Estate Talk

Posted: December 6, 2012 2:00 a.m.
Updated: December 6, 2012 2:00 a.m.
 

A trend that Realtors first started noticing back in February was confirmed this October as home sales took off statewide, shooting up throughout the Santa Clarita Valley by 23.3 percent compared to a year ago.

The positive trend spotted months ago found traditional homeowners who have equity in their property accounting for a growing percentage of people selling homes today. In fact, the share of so-called “equity sales” increased during October to its highest level in four years.

Traditional owners hunkered down throughout much of the housing downturn and languid recovery, refusing to sell, with most of the new listings action dominated by underwater owners who got their lender to agree to a sale at less than what was owed, or lenders who listed properties acquired through foreclosure.

But now nondistressed, traditional sales are especially strong and are up nearly 50 percent from a year ago. Every increase brings us closer to a normal market.

REO sales — property owned by lenders — are down more than 51 percent, primarily due to a short supply of property held by banks.

More than just increased activity by owners with equity, the drop in REO listings has pushed the percentage of nondistressed properties total to its highest level in four years. Still, the change is welcome news no matter the catalyst.

The share of equity sales compared with total sales expanded in October. Equity sales statewide in October increased to 63.4 percent, the highest level since June 2008. Equity sales made up about half — 49 percent — of all sales in October 2011.

Locally, equity sales captured 36.5 percent of October closed escrows, but that number is misleading because differences in the way it’s reported statewide and locally, and because some Realtors have yet to get used to new reporting requirements which require them to specify the type of sale. Nonetheless, the local percentage is up markedly from the 32.5 percent equity sales reported four months ago when the Southland Regional Association of Realtors first started tracking the number.

Regardless, here in the Santa Clarita Valley and statewide the share of bank-owned REO sales statewide continues to contract while the share of short sales essentially is holding steady.

Statewide, the number of short sales has been hovering around the 24.4 percent mark, but in Santa Clarita, they accounted for 35.1 percent of closed escrows. That’s another dash of positive news indicating that lenders have accepted that a short sale is preferable to foreclosure for all parties — lenders, investors, sellers, buyers, and, perhaps most importantly, local communities.

Even in the best of instances, foreclosure devalues everyone’s property while all too often yielding profound complications, long-term burdens for neighbors and added headaches for local government in the process.

The share of REO sales statewide fell further in October, dropping from 12.3 percent in September to 11.8 percent in October and was down from 28 percent in October 2011. Locally, the share of REOs stands at 12.7 percent.

Much of 2013 will be spent dealing with similar issues, yet sale-by-sale, neighborhood-by-neighborhood, city-by-city, California’s housing market is inching toward the new normal.

With luck and lots of hard work, I expect to have even more optimistic news come this time next year.

Erika Kauzlarich-Bird is president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.

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