Thursday, February 19, 2009

More On the California Real Estate Market

The chart above from this CD post was featured last night on CNBC's "The Kudlow Report," and was also discussed this morning in The Gartman Letter. As Dennis Gartman pointed out:

What we found interesting is that when one multiplies the data through, the total dollar amount of homes sold in 2008 was above that of 2007. In 2008, $1.53 billion was “done” in the housing market in California’s existing single family homes, up from $1.42 billion in ’07. We suspect that few… if any… would have bet that more money was spent on single family houses in California in 2008 compared to 2007. Certainly we would not have. Now we know… and we find it rather interesting.

And here are some additional interesting items from the California Association of Realtors (CAR) housing report for December 2008:

1. The unsold Inventory Index for existing, single-family detached homes in December 2008 was 5.6 months, compared with 13.4 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

2. The median number of days it took to sell a single-family home was 46.1 days in December 2008, compared with 66.7 days for the same period a year ago.

MP: In other words, the Inventory Index in California decreased by almost 8 months, and the median number of days to sell a single-family home decreased by almost 21 days, from December 2007 to December 2008. The way the media reports it, you would think we were years away from a solid recovery in the real estate market, when some of the housing data suggest otherwise. The fall in home prices is helping to stimulate home sales, as the Law of Demand would predict. In other words, market forces are working in the California real estate market.


At 2/19/2009 7:40 PM, Anonymous Anonymous said...

In other words, market forces are working in the California real estate market.

Are FHA loans considered market forces? To my mind they are government forces.

Government insured FHA loans constituted 40% and 25% of all transactions in SoCal and NorCal in January, 2009.

I wonder what the default rate, loss rate and government insurance payouts will be on these loans?

At 2/19/2009 9:42 PM, Anonymous Anonymous said...

The California home market was distorted for nearly 30 years by Proposition 13, encouraging homeowners to stay in their homes longer than they would otherwise due to property tax caps.

Now that the bubble has burst and California property property taxes are still going up (because prop taxes had been artificially capped for so long) while home values are falling, homeowners now have good reasons to sell.

So California is an outlier and much unlike the rest of the country.

At 2/20/2009 5:16 AM, Anonymous Anonymous said...

Ah-about the previous Prop 13 post- you may not realize that in down markets California law permits home assessments to be lowered. My assessments on my several properties have all been lowered. Artificially capped? Don't let it bother you too much...Californians pay plenty of other taxes....belive it.


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