In contrast to the national news that existing home sales rose from June to July but are still below the levels from a year ago, California is bucking the national trend by showing its 4th straight month of year over year sales gains. Many pundits and commenters poo-poo monthly sales gains, claiming only year over year gains will signal the end of the housing down turn. This data could be a signal.
You may also note the median price is 40% lower than a year ago. There are a couple of explanations for this. First, the majority of purchases are repo properties which are selling at deep discounts due to the severe state of disrepair of most of the properties. Second, most of the sales are taking place in the inland counties where property is much less costly that coastal or major city (LA, SF, San Diego) areas. So much for the end of long commutes due to high gas prices.
My sense is that Californians in particular have a strong desire to own their own home. California is a state of immigrants and many of them feel home ownership is a part of the American dream. They are taking advantage of the current price weakness to get their piece of the dream.
A final note on home prices. The Case-Shiller report made big news with a year over year price decline of about 16%. This report tracks homes in 20 cities. I took a close look at the Office of Federal Housing Enterprise Oversight [OFHEO] survey released yesterday and found some surprising facts. The OFHEO index is a purchase only index tracking the repeat sales of the same single family properties. Here are some facts from the report released 8/26/2008:
- Nationwide year over year price decline of 4.8%.
- 30 states showed year over year price increases.
- Only 3 states, CA, FL and NV, showed year over year price decreases of greater that 10%.
My conclusion is that at least in the West, the increased home sales will start working to absorb the bank owned inventory and point to a resumption of more normal real estate conditions. There are different ways to look at prices, but they may not have fallen as far as many believe, especially outside of the foreclosed inventory. As the public and even the media start to realize there is a bottom to this crisis, it will be interesting to see the effects on both the housing and stock markets.