California Housing Market Rebound - Illusion or Reality?

Finally, some good news is coming out of the California Housing Market. The California Association of REALTORS ® (C.A.R.) reported positive trends in single-family home sales over the same period last year. According to the ‘experts’ these trends are indicative of a rebound or turn around in the California Real Estate. The nation’s attention is now sharply riveted to watching the California housing market since historically California sets the stage and the other states start to follow suit.

The Reality is…
In January 2009, C.A.R reported an increase in sales of 100.8% for existing, single-family homes sales in January 2009 compared to January 2008 while the unsold inventory decreased to 6.7 months from 16.6 months a year ago. In addition, the average days a house was on the market declined from 70.8 days to 49.9 days. This is the first time since October 2005 that the California Housing Market has seen existing home sales of over 600,000 homes and a 14% increase over the previous month.

According to C.A.R.’s President James Liptak, “The strength in California home sales in recent months signifies that the market is gradually working it ways through the large numbers of distressed sales that have followed in the wake of the troubled mortgage problems. With the 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.”

With the possibility of positive cash flow properties and volatile stock market, many investors are also starting to buy again in California. Real Estate over time has always proven to be a good investment showing an average of a 10% return.

This data indicates that more homes are selling and selling faster while fewer homes are coming on the market. All good signs of a potential California Housing Market turn around or rebound.

Light at the End of the Tunnel or Illusion?
While most of the indices for a turnaround are positive, there are a few that are still concerning. For example, in the California Housing Market, home prices were down 40.5. The median house price was down to $254,350 over last year and 9.5% over December’s median price of $281,180 median price. That doesn’t bode well for the people who bought at the top of the market – even the ones that are still paying their monthly mortgage payments. The Center for Economic and Policy Research in Washington estimated that 30% of homeowners between 45 and 54 years of age, owe more on their mortgages than their homes are currently worth.

Most analysts predict that the California Housing Market will continue to see price declines throughout 2009 and probably into 2010. The hope is that the decline will not be as steep as it has been over the previous year and will eventually taper off, signifying an end to the price drop and the beginning of stabilization and eventually increase.

The one major wildcard that deserves close scrutiny and analysis for the California Housing Market will be the homes going into foreclosure or short sales. Due to the Federal Mortgage Loan Modification Plan, many banks have been trying to work with distressed homeowners to keep them in their homes. A lot of these properties will eventually have to be sold. A report by bank regulators found that even though more short sales were approved in the first quarter of 2009 than the last three month of 2008, almost six foreclosures were put on the market for every short sale.

Although not everyone agrees that the California Housing Market is rebounding, most analysts and people that watch the California Housing Market agree that the worst seems to be over. There will still be price adjustments or corrections. As long as the banks don’t dump a huge number of deeply discounted foreclosed houses on the market all at one time, California may soon be on the mend. However, we are not out of the woods just yet.

For more information on the CAR Mortgage Protection Program, the Federal or State Tax Program; contact your California REALTOR® directly. If you are not currently working with a California REALTOR®, contact me at andeen@charter.net or 1-800-694-2265 extension 15 or on my website www.andeeallen.com.