California Home Market Shows First Signs of Recovery (Update3)
By Daniel Taub
June 18 (Bloomberg) -- The California housing market may be showing the first signs of a recovery after three years of declining sales
and two years of rising foreclosures, the UCLA Anderson Forecast said today.
While home prices
in the most populous U.S. state are still weak, the number of houses and condominiums
changing hands in some parts of California is rising, according to the Anderson Forecast
at the University of California, Los Angeles, which released its 127-page forecast for both the state and the U.S. today.
``The combination of steep price declines, lower interest rates and an easing of the credit crunch may now be bringing bargain-hunting buyers back into the market'' for California homes, Ryan Ratcliff
, an Anderson Forecast economist, wrote in the report. Riverside County posted a year-on-year gain in the number of homes sold, he wrote.
The collapse of the subprime-mortgage market contributed to an increase in foreclosures as well as drops in home prices and sales in California. In the first quarter, mortgage defaults in the state rose 143 percent to the highest level in 15 years, according to La Jolla, California-based DataQuick Information Systems.
Foreclosures will probably continue to hurt California's housing market
for the rest of this year and then start to moderate in 2009, the Anderson Forecast said. While a ``normal'' housing market ``is still a long way off,'' according to the report, the increase in home sales in some parts of the state is a positive sign.
``This is the very dim flicker of the light at the end of the tunnel,'' Ratcliff said in an interview. ``I can't say that I see an unambiguous sign of a turnaround, because by the time it's unambiguous, it's already been happening three or four months.''
Southern California house and condominium sales dropped 15 percent last month to the lowest level for a May in two decades as prices plunged 27 percent, DataQuick said earlier this week. The median home price in the region was $370,000 last month. The last time it was lower was in March 2004. San Francisco Bay Area home sales dropped 23 percent last month, DataQuick said today.
The number of homes sold dropped in every California county DataQuick tracks except Riverside, where home sales increased 4.1 percent. Foreclosure sales accounted for 57 percent of Riverside's May sales, the most of any Southern California county, DataQuick said.
The price per square foot for a home in Sacramento, California's capital, dropped 31 percent in March from a year earlier to $160, while prices in San Diego declined 27 percent to $251 a square foot, according to a report released June 2 by New York-based Radar Logic Inc., a data company.
In California, the ``unprecedented speed of the price adjustment means that instead of several years of slow bleeding (like the 1990s), we have compressed the necessary adjustment into two years of intense housing pain,'' Ratcliff wrote in today's report. ``Mom always said it's better to just rip the Band-Aid off.''