Saturday, June 19, 2010

California Real Estate Recovery Continues in May

Highlights from the DQNews report on May California home sales:

1.  In May, 40,965 houses and condos were sold statewide, which was an increase of 9.3 percent from April (28,111), and up 4.9 percent from the 37,967 houses sold in May 2009 (see chart).

2. The median price for a California home sold in May was $278,000, up 9 percent from $255,000 in April and up 20.9 percent from $230,000 last May (see chart).

3. The year-over-year increase was the seventh in a row (starting in November 2009, which is likely the bottom for home prices in CA), following 27 months of year-over-year declines.

4. Of the existing homes sold in May, 35.5 percent were properties that had been foreclosed on during the past year, down from 38.1 percent in April and down from 50.2 percent a year ago (see chart). The last time foreclosure resales were as low was in March 2008, 27 months ago. 

MP: This report seems to have all of the key ingredients of a real estate market in full recovery mode: 1) increasing unit sales, 2) increasing median home prices for seven consecutive months, and 3) declining foreclosed homes as a share of sales (27-month low).   

5 Comments:

At 6/19/2010 11:19 AM, Blogger Evil Red Scandi said...

Activity is up, but according to several of my friends that work in the biz (real estate agents, brokers, and mortgage reps), the activity is unusual. There is still a very high percentage of short-sales, and an unusually high percentage of investment buyers (one broker told me 70% of his sales).

So prices have stabilized and even gone back up a little bit, but that's not really evidence of a return towards status quo ante. That's not to say that a new, strong market based on investment owners won't emerge, or that the traditional owner-occupier buyers won't come back. Or this might just be temporary binge of bargain-hunting or capital flight from the stock market and the market will resume tanking again. It just means that things are different, and the market is at a slightly higher price point that it was a few months ago. Anyone who can accurately predict the future based on this has an excellent opportunity to make a very large pile of money (it ain't me).

It's situations like this that tempt me (sometimes successfully) to throw the "Cargo Cultist" label at economists - they see some trends in numbers, match them up against previous trends, and say "ooooh, we're tanking!" or "oooooh, we're recovering" without understanding the underlying reasons behind those numbers. If the underlying reasons don't match as well, the trends have far less (and perhaps zero) predictive value.

 
At 6/19/2010 11:23 AM, Blogger Evil Red Scandi said...

Of course, there's always the possibility that my friends were lying or that they coincidentally represent some bizarre subset of activity that's not representative of the whole (data not being the plural of anecdote, etc).

But that being said, I'll take anecdotes from people who are actually "on the ground" over pretty charts and graphs based on highly aggregated data every time.

 
At 6/19/2010 1:42 PM, Anonymous Benny The Man said...

Home sales are chugging along in Los Angeles. The market already bottomed, the worst is past. Sales and prices edging up steadily, if slowly.
We are in the early stages of a recovery, so there be mixed signals from time to time. No recovery is a straight line on all fronts.
Look for higher property values in next several years, as real interest rates trend towards zero.
Huge piles of capital on world markets.

 
At 6/19/2010 3:03 PM, Blogger juandos said...

Hmmm, real estate recovery continues, he"

Well now I'm looking at the May numbers at for California at RealtyTrac:

Note the following:

New Foreclosure Filings = 72,030 YTD = 375,307

Foreclosure Sales = 13,804 YTD = 78,438

Is that a lot of housing that still open compared with actual housing out there?

The relative upside: 37% savings from the (?) original prices...

California median home price rises in month

'The median home price in California last month surged 20.9 percent from May 2009 to $278,000, as inventories of low-cost foreclosures dwindled and transactions in mid-range and high-end neighborhoods claimed a greater share of sales, a tracking firm reported Thursday'...

Sounds like the news is getting better all the time...

 
At 6/20/2010 3:17 PM, Anonymous Anonymous said...

I am a real estate investor of 30+ years. I move in and out of the market with the cycle. I sold in early 2006 (also in 1989). I shop constantly, and buy only when I feel the cycle is positioned for an uptrend. I hold for years until the market gets really frothy.

I bought just one rental home last year (from a bank). There is nothing available today at close to the price I paid.

I am still shopping, planning to buy more (in the $300K to $600k range), but there is less inventory and the prices are up from last year.

Like prior cycles, I expect a slow recovery, with a few years of little price movement, followed by a few years of a stronger boom.

 

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