The California Association of Realtors® has released its report for March.
Home sales increased 17.5 percent in June in California compared with the same period a year ago, while the median price of an existing home fell 37.7 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
“Sales were driven in part by large shares of deeply discounted distressed sales in many parts of the state,” he said. “With lower prices and favorable interest rates, affordability also has improved significantly in recent months, paving the way for many buyers to purchase their first home.”
“The significant declines in the median price over the past several months are largely due to a dramatic shift in the sales mix since the onset of the credit crunch and the increase in the share of distressed sales,” said C.A.R. Chief Economist Leslie Appleton-Young. “A year ago, the under $500,000 price range accounted for 40 percent of sales, the middle segment made up about 45 percent, and the over $1 million segment captured 15 percent of the market. As of June 2008, the shares had shifted to 67 percent, 24 percent, and 9 percent, respectively.”
Declines From Peak
The following chart is from “TC” who has been monitoring C.A.R. and DQNews data. C.A.R. data contains resale single family residences and new homes. DQNews data contains resale single family residences and new homes.
click on chart for sharper image
It should come as no surprise that prices are continuing to head lower out here, but the amount of the drop continues to amaze me. Again, these numbers are directly from the California Realtors so there is certainly no reason for them to fib to the downside.
My quick take from these numbers is that we are finally beginning to near a nominal price bottom in California. Median statewide price drops are now nearing 40% or nearly $230K . Soon enough even the Google millionaires around Santa Clara won’t want to overpay.
The big question is what does a “bottom” look like. I think too many envision a bottom consisting of a quick return to rapidly increasing home prices. These individuals are confusing a stock bottom (e.g. 1987) with a housing bottom. Rather than a quick turnaround in my opinion we are likely to see about a 1/2 decade of flat nominal prices (falling real prices) followed by another 1/2 decade of stable real prices (+/- 3% nominal price growth). After that (or around 2020) it’s anyone’s guess.
I agree with TC on the nature of the flatline bottom, but I think he is at least a couple years early when stating “We are finally beginning to near a nominal price bottom in California.”
I think at least one more wave lower is coming when commercial real estate plunges unemployment soars. I expect the recession we are in to be long and deep with a very slow recovery. In April I presented the Case for an “L” Shaped Recession. Recent data solidifies that view.
Case-Shiller data was out today, and it is based on repeat sales, arguably a better way of looking at things vs. median prices. I will have a post from TC on Case-Shiller soon. Thanks TC!
Mike “Mish” Shedlock
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