Bay Area Home Sales Lackluster in October

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

LA JOLLA, Calif. (DQNews) -- The Bay Area housing market logged another month of lackluster activity in October as some of the recent signs of incremental market improvement began to fade.

High-end sales dropped markedly, likely the result of changes to "conforming loan" limits, a real estate information service reported.

A total of 6,444 new and resale houses and condos sold in the nine-county Bay Area last month. That was down 4.5% from 6,749 in September, and up 5.3% from 6,122 in October 2010, according to San Diego-based DataQuick.

Bay Area sales are usually flat from September to October. October sales have varied from 5,486 in 2007 to 13,392 in 2003. The average since 1988, when DataQuick's statistics begin, is 8,620.

"We've been watching the real estate market take itty bitty baby steps in the direction of normalcy, but that trend paused last month. ARM and jumbo loan usage went back down, cash and investor sales went back up as a portion of the market. This may well be a short-term pause while the market recalibrates changes in loan thresholds. We'll know more in a few months," said John Walsh, DataQuick president.

The conforming loan limit was reduced Oct. 1 from $729,750 to $625,500 for most Bay Area counties. In Solano County it went from $557,500 to $400,200; in Sonoma County from $662,500 to $520,950.

The median price paid for all new and resale houses and condos sold in the Bay Area last month was $350,000. That was down 4.1% from $365,000 in September, and down 8.6% from $383,000 in October 2010. Last month's median was the lowest since last February when it was $337,250.

Last month distressed property sales -- the combination of foreclosure resales and "short sales" -- made up about 45.4% of the resale market. That was the same as in September and down slightly from 46.5% a year ago.

Foreclosure resales -- homes that had been foreclosed on in the prior 12 months -- accounted for 25.3% of resales in October. That was down from a revised 25.4% in September, and down from 28.6% a year ago. Foreclosure resales peaked at 52.0 % in February 2009. The monthly average for foreclosure resales over the past 15 years is about 9%.