Home sales increased 100.8 percent in January in California compared with the same period a year ago, while the median price of an existing home fell 40.5 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
Statewide sales in January edged past the 600,000 threshold for the first time since October 2005, said C.A.R. 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.
Across the country, existing-home sales declined in January with some buyers waiting to see how details of the economic stimulus package would affect them, according to the NATIONAL ASSOCIATION OF REALTORS®. At the same time, inventories fell to a two-year low.
Lawrence Yun, NAR chief economist, said there was understandable hesitation by some home buyers. Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus, he said.
The housing market will soon get a lift from very favorable buying conditions” not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates.
NAR estimates the impact of the stimulus package and lower interest rates on the housing market to be about 900,000 additional home sales in 2009 compared to conditions before the stimulus package. Inventory is expected to fall below an 8-month supply by year’s end, which would be consistent with home price stabilization.
Inventory dropped 2.7 percent
Total housing inventory at the end of January fell 2.7 percent to 3.60 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. Because sales were down, the January supply is up from a 9.4-month supply in December.
The drop in total inventory is an encouraging sign because the number of homes on the market has declined steadily since peaking in July 2008, and inventory is at the lowest level in two years, Yun said. In January 2007 there were 3.54 million homes for sale.
How Low Will They Go?
With analysts predicting prices will continue to drop in the range of another 7″11% in 2009, California’s numbers could signal a willingness of investors to buy up low-priced properties at this point in the recovery cycle.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, says we are living in a bifurcated market divided between distressed sales and traditional homes.
It appears that in many instances a buyer can get a really good deal on a distressed sale, although that home may require some significant effort to bring it up to standard. A preliminary analysis by NAR suggests that non-distressed properties are holding their value much better.
Distressed sales activity appears to be leveling off, although there are wide differences locally. For example, close to 80 percent of all sales are either foreclosed properties or short sales in Santa Ana, Calif., but less than 20 percent in the Chicago region, Yun said.
About a quarter of all inventory is listed as being distressed, but NAR estimates that distressed sales foreclosed or those requiring a lender-mediated short sale comprised about 45 percent of all sales in January.
Significant local market variations continue. A majority of markets experienced sales declines of more than 20 percent from a year ago, but some markets appeared to have reached the tipping point of accelerating home buying, Yun said. For example, home sales in Las Vegas have more than doubled with some reports of multiple bids.
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