Here’s a highly encouraging headline from Bloomberg: “California's Discount Foreclosure Sales Point to Housing Bottom.” A bottom? Bloomberg may be on to something. It reports that home sales in California rose for three consecutive months starting in April. That’s the first time that’s happened in 30 months. Economy.com’s Mark Zandi says the news “signals the beginning of the end.”
Why the strength in sales? Banks have finally figured out that they need to cut prices big time to unload foreclosed properties, so prices are off anywhere from 40% to 60% or more from their peaks in markets with high foreclosure rates. Foreclosures accounted for 75% of homes sales in Merced County in June, 72% in Stanislaus County, and 66% in San Joaquin County. ``Half off in a decent neighborhood is close to the bottom,'' says PIMCO’s Bill Gross. Buyers are often investors who pay so lttle they can rent out properties for 10% of the purchase price. Inventory statewide is down to 7.7 months, from 10.2 months a year ago. ``We've found the bottom,'' says the head of one local broker. ``The financial institutions have seen the light and are allowing the market to find its own level.''
Even Karl Case, he of the Case-Shiller home price index so beloved of the bears, allows that “things are beginning to happen.”
So sales are up, inventories down, and prices stabilizing—albeit at low levels. That’s what the end of a long slide figures to look like. . .