Markets Are Working: CA Home Sales Increase +100% as Home Prices Fall

LOS ANGELES (Feb. 26) – Home sales increased 100.8% in January in California compared with the same period a year ago, while the median price of an existing home fell 40.5%, the CALIFORNIA ASSOCIATION OF REALTORS (CAR) reported today.

“Statewide sales in January edged past the 600,000 threshold for the first time since October 2005,” said CAR President James Liptak. “The strength in California home sales in recent months signifies that the market is gradually working its way through the large numbers of distressed sales that have followed in the wake of the troubled mortgage problem. With favorable home prices and historically low mortgage rates, affordability in the California housing market is now at its highest since the start of the decade.”

Closed escrow sales of existing, single-family detached homes in California totaled 624,940 in January at a seasonally adjusted annualized rate, an increase of 100.8% from the revised 311,160 sales pace recorded in January 2008. Sales in January 2009 increased 14% compared with the previous month.

The Unsold Inventory Index was 6.7 months in January, compared with 16.6 months in January 2008 (a reduction of almost 10 months), and the median number of days it took to sell a single-family home was 49.9 days in January 2009, compared with 70.8 days in January 2008 (almost a 21 day reduction).

The way the media reports it, you would think we were years away from a solid recovery in the real estate market, especially in states like California, when some of the housing data suggest otherwise. The 40.5% fall in California home prices is helping to stimulate home sales there, as the Law of Demand would predict.

Overall sales volume has increased in California by 20.5%, from $1.32 billion a year ago to $1.58 billion in January this year, the Inventory Index has decreased by almost 10 months, and the median number of day to sell a home decreased by almost 21 days. In other words, market forces are working in the California real estate market.

Comments

[Steven Hansen:]

the market is not working if the majority of these are short sales and foreclosures. but it is a good sign none the less. we need to keep these puppies moving and not let foreclosures pile up.

i am waiting for current homeowners to begin accepting the new reality in housing costs and listing their houses at the prices buyers will pay.

Mar 06 04:33 AM

[John Lounsbury:]

According to the National Association of Realtors (NAR), the West region, which includes California, has had almost 30% average price declines from the housing bubble top. www.realtor.org/resear...

No other section of the country has reached 20% in the NAR data.

As pointed out by the Hand, California has had a large percentage of distressed sales. Nationally the percentage is 45%. California is much higher.

We have to work our way through the current foreclosures and the overhang of foreclosures to come before we can call increased sales good news. If you want a ray of sunshine, at least the foreclosures are starting to sell.

The bottom in average house price is still likely 10-15% lower, although some local markets may be healthier. Of course, after a bubble we may overshoot "equilibrium" prices to the downside before coming back up. The bottom line is that, until foreclosures slow down and that source of inventory becomes less dominant, the housing decline end is not near.

Mar 06 08:21 AM

[romorris:]

The house CA people buy are a lot cheaper. They are buying the crappy houses [at foreclosure half the time]. It's not the prices of houses that has decreased so much, as the quality of the houses bought.

Prices will appear to go down when the people bottom fish. In actuality, prices have not fallen all that terribly much at all for any given house. Prices of houses sold down 40% - I'll buy it. Price of houses in general - down maybe 20% tops.

Mar 06 10:48 AM

[CLH:]

Good news but no different then when the stock market crashes and the volume goes way up. The market always works but the end is not yet.

Mar 06 12:58 PM

[Dave Shafer:]

Amazing how some folks don't get how the real estate market functions completely different than the stock market! From the emotional attachment to home ownership [compared to owning stocks] to the fact people have to pay for shelter one way or another, to the functioning of credit, to the liquidity factor there is really not much comparision. Owning a home is about how one decides to live, while owning stocks is about the cash flow that buisness can generate. About the only similiarity is that folks forget price is what someone pays while value is what someone gets in both markets.

Mar 06 01:17 PM

[henarl:]

Twice as many sales at half the price - Whoopee! Cut the price in half again and watch the sales skyrocket. Might be okay for the realtors but not real good for existing homeowners.

Mar 06 04:26 PM

[c smith:]

Are there still moratoria on foreclosures anywhere in CA?

Mar 06 05:11 PM

[Sean in CA:]

What would you know about houses? Judging from reading your post, it seems you're living under a rock somewhere, but certainly not a rock in California. Prices are down across the board.


On Mar 06 10:48 AM romorris wrote:

> The house CA people buy are a lot cheaper. They are buying the crappy
> houses [at foreclosure half the time]. It's not the prices of houses
> that has decreased so much, as the quality of the houses bought.
>
>
> Prices will appear to go down when the people bottom fish. In actuality,
> prices have not fallen all that terribly much at all for any given
> house. Prices of houses sold down 40% - I'll buy it. Price of houses
> in general - down maybe 20% tops.
>

Mar 06 08:41 PM

[Tony Petroski:]

These numbers are...staggering. I want to believe them, just like I want to believe that the Chinese are pulling their people out of (I was going to write "recession," but the Chinese numbers say their economy is "growing" by 8%). A reduction in the median price of a home by 40% in one year? That's unheard of in the history of Real Estate. Congratulations you Golden Staters!

Mar 06 08:46 PM

[Mr. Ed, Jr.:]

Let's see.... California taxes and unemployment are are among the highest in the country, and the state is among the brokest.

But the good news is.....our residents are having a half-price sale on homes..

Mar 06 11:14 PM

[terryg8:]

On Mar 06 11:14 PM Mr. Ed, Jr. wrote:

> Let's see.... California taxes and unemployment are are among the
> highest in the country, and the state is among the brokest.
>
> But the good news is.....our residents are having a half-price sale
> on homes..

As a very unhappy resident of So. Cal. I must say it is good to hear that houses are now selling here. Beyond our 10% unemployment, super high income taxes, and general Socialist State Government making life miserable, you forgot to mention that 1 in 5 people in LA County are either on Welfare of Disability, that Spanish is the mot common first language spoken in our schools which are rate #47 in the nation by the way, the State is out of water, our registration for our cars just doubled, our gas is the most expensive in the nation, we have the highest sales tax in the nation (9.75%) ,our air is the dirtiest in the nation, and Octomom will represent our state as the next Miss California in the Miss America pageant!

Now I can sell my home and move to Las Vegas where life is real!

Mar 07 04:14 AM

[markg:]

Why is it that these articles that keep citing increased home sales do not mention that when a house is taken back by the bank it is counted as a sale. I have posted this comment at least three times on SA but the authors of these articles looking for good news keep drinking the NAR kool-aid.

I follow the SoCal real estate market pretty closely, and the houses under $600k are starting to sell. if you follow individual houses, when they come up and they are priced right they do sell. The houses over $7ook are still sitting. This also leads to the lower medians posted.

Mar 09 12:56 AM

[Seth Chalnick:]

Its not "the real estate market" that's finding a bottom... its demand increasing a little bit on the lowest end of the spectrum. The $700k to $2m market is still only off about 10%... and we'll see it collapse about 40% off peak prices before this is over... the only question is whether the low end will find a bottom and bridge the gap to the high end... or whether we see asset deflation across the board as this mess continues to unravel.

See my seeking alpha article posted mid december. This was easy to predict then, and its even easier to see now.

Mar 09 01:06 AM

[mallarde:]

Prices in the higher end of the California market may be off 10% to 20% off the peak, but check out prices as recently as 2002. At least for condos, prices are STILL over 200% of prices in 2002! It's really amazing.

Even presuming that demand has gone up with population and there are more two income families, etc... some of these prices have far more to fall.

Smart people are renting. Homeowners trying to sell in this area seem like they just sent out agents looking for fools that fell off the back of the apple cart. The market might clear faster if there were not so many agents fighting to be the "listing agent" for homes in nicer areas.

Mar 09 05:06 AM

[BlicketyBloo:]

To Markg . . .

Direct from the NAR is their response . . . I asked them too . . . you are wrong about deed conveyances, unless you think they are lying . . . if so, here's the guy's number, call and argue with him!

"That's incorrect. We only count closed transactions that are listed on an MLS and purchased on the open market. I wish so-called reporters would confirm with us and not rely on blogs as credible sources of information."

Cordially,

Walter Molony
NAR Public Affairs
202/383-1177

Mar 09 09:47 AM