California Home Sales: 43% Year Over Year Increase!

by: Tim Plaehn August 27, 2008    
Tim Plaehn

Tim Plaehn

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Business - California home sales rise for fourth month - sacbee.com.

In contrast to the national news that existing home sales rose from June to July but are still below the levels from a year ago, California is bucking the national trend by showing its 4th straight month of year over year sales gains. Many pundits and commenters poo-poo monthly sales gains, claiming only year over year gains will signal the end of the housing down turn. This data could be a signal.

You may also note the median price is 40% lower than a year ago. There are a couple of explanations for this. First, the majority of purchases are repo properties which are selling at deep discounts due to the severe state of disrepair of most of the properties. Second, most of the sales are taking place in the inland counties where property is much less costly that coastal or major city (LA, SF, San Diego) areas. So much for the end of long commutes due to high gas prices.

My sense is that Californians in particular have a strong desire to own their own home. California is a state of immigrants and many of them feel home ownership is a part of the American dream. They are taking advantage of the current price weakness to get their piece of the dream.

A final note on home prices. The Case-Shiller report made big news with a year over year price decline of about 16%. This report tracks homes in 20 cities. I took a close look at the Office of Federal Housing Enterprise Oversight [OFHEO] survey released yesterday and found some surprising facts. The OFHEO index is a purchase only index tracking the repeat sales of the same single family properties. Here are some facts from the report released 8/26/2008:

  • Nationwide year over year price decline of 4.8%.
  • 30 states showed year over year price increases.
  • Only 3 states, CA, FL and NV, showed year over year price decreases of greater that 10%.

My conclusion is that at least in the West, the increased home sales will start working to absorb the bank owned inventory and point to a resumption of more normal real estate conditions. There are different ways to look at prices, but they may not have fallen as far as many believe, especially outside of the foreclosed inventory. As the public and even the media start to realize there is a bottom to this crisis, it will be interesting to see the effects on both the housing and stock markets.

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This article has 25 comments:

  •  
    Aug 27 11:41 AM
    I think you need to go back to school and do more research. The case schiller index comprises 20 MSA, not 20 cities. Those 20 metropolitan statistical areas comprise over 70% of the total US population. In addition, the case schiller index tracks resales of all homes within those MSA's, not just sales that meet the conforming loan limits. The real story is in-between the number from the case schiller index and the ofheo numbers.

    Regards
    Reply | Link to Comment
  •  
    Aug 27 11:41 AM
    well, too soon to call anything yet!!
    Reply | Link to Comment
  •  
    Aug 27 12:13 PM
    Would you care for some ice with that KoolAid?
    Reply | Link to Comment
  •  
    Aug 27 12:16 PM
    Would like to see the data that says lower priced properties in California are seeing increasing volume. Can you point to a URL?
    Reply | Link to Comment
  •  
    Aug 27 12:23 PM
    My own belief is that we are starting to see the formation of a "bull trap" here, and that the real price slide in real estate lies ahead. ARM resets won't peak until 2011, so inventories are all but certain to rise. Energy prices will move far higher on fundamentals in coming years; thinking that $4.50/gal gasoline crimped some commuters is going to look mighty quaint when gasoline crests $8.00 a few years out. Add to that the likely specter of higher mortgage interest rates and you've got a pretty good, if not perfect, storm that will yield vastly lower prices. California real estate remains "affordable" only under extremely generous lending terms or to the unusually wealthy. As ordinary homeowners (folks who were smart enough to buy in 1995, say, and didn't pull multiple cash-out refis along the way) see their equity evaporate, they'll curtail spending further and we'll have more fuel for the deflationary spiral.

    I certainly expect to see a little bump in prices while rates remain low, and that will induce a whole lot of bottom-calling. I also believe very strongly that after a mania as long as we had, the pain will last longer than real estate touts will ever be willing to believe.
    Reply | Link to Comment
  •  
    Aug 27 12:24 PM
    "Your" an idiot.
    Reply | Link to Comment
  •  
    Aug 27 12:56 PM
    Add to that an aging population of baby boomers who tend to downsize.
    I'm seeing it in my own neighborhood. Within ten years, many of my retired neighbors will most likely sell the homes they are in. Housing will be soft for years.
    Reply | Link to Comment
  •  
    Aug 27 01:18 PM
    "In contrast to the national news that existing home sales rose from June to July but are still below the levels from a year ago,"

    You lost me right there, and that was just the first sentence. It's not hard to show an increase in home sales if you keep revising the previous month's number down each month later. The fact that you never refute this and even seem to go along saying that "California is bucking [this] trend" tells me that you, like many others here have pointed out, have no idea what you are talking about.
    Reply | Link to Comment
  •  
    Aug 27 01:18 PM
    "In contrast to the national news that existing home sales rose from June to July but are still below the levels from a year ago,"

    You lost me right there, and that was just the first sentence. It's not hard to show an increase in home sales if you keep revising the previous month's number down each month later. The fact that you never refute this and even seem to go along saying that "California is bucking [this] trend" tells me that you, like many others here have pointed out, have no idea what you are talking about.
    Reply | Link to Comment
  •  
    Aug 27 03:13 PM
    Unfortunately SA changed my headline (which I should have repeated in the post) that existing home sales in California were 43% higher in July than a year earlier. I will see if they can add it in.
    Reply | Link to Comment
  •  
    Aug 27 03:27 PM
    You sound more like a fool who fell from the 13th floor. When passing down by 10th floor, he said to himself, "So far so good".

    Moral of this story is that there are better exercises than jumping to conclusions and riding on guesses.

    Just check patrick.net, there is whole wave of alt-a and low/no doc (meaning liar loans), and now prime is performing worse than sub-prime as people are getting stuck with -ve acquity.

    What we have seen is only tip of the ice-berg. I suspect, home prices have atleast 20-30% to drop yet.
    Reply | Link to Comment
  •  
    Aug 27 03:33 PM
    Only because the prices have fallen, are there any sales. I'm not worried of the prices taking off anytime soon, as the money out there is being guarded a bit more careful by the banks... I hope prices continue to decline (To an AFFORDABLE level, that allows me to ENJOY LIFE and also be able to SAVE). I hope almost all lending comes to a halt. That will drive the prices DOWN and maybe I will continue making the same income. I can then live a much less STRESSFUL life.
    Reply | Link to Comment
  •  
    Aug 27 03:34 PM
    patrick.net RULES!!! That sight should be on Lawrence Yuns Favorites...
    Reply | Link to Comment
  •  
    Aug 27 03:38 PM
    Headline fixed by SA. Thanks.
    Reply | Link to Comment
  •  
    Aug 27 03:49 PM
    Real headline: "Home sales in state soar as prices plunge"

    Patrick version: "California median price dropped 40.3% in year"

    Very one-sided site leading the pessimists.
    Reply | Link to Comment
  •  
    Aug 27 04:34 PM
    Any breakdown on different Zip Codes?
    Reply | Link to Comment
  •  
    Aug 28 09:17 AM
    RE in California is still too expensive.
    Reply | Link to Comment
  •  
    Aug 28 10:06 AM
    california wages do not allow for the cost of homes in this state.
    Reply | Link to Comment
  •  
    Aug 28 10:15 AM
    You must think we are a bunch of fools. Why are you using percentages? You very well know if we had one home sale last month and we have 2 this month we have a 100% increase. You can twist these statistics any way you want. Give us some real numbers as comparision. Also price comparisons. I just bought a condo for my son in Sacramento, California for $68,000 THAT HAD A MORTGAGE WITH COUNTRYWIDE FOR OVER $180,000. It is in a 4-plex and two other units are for sale with no buyers for over 18 months. This unit is in perfect shape - granite tile counter tops, maple cabinets, tile and solid oak floors and upgraded appliances. The other two units are in pretty good shape but requires some work but no offers. This is desperation selling!!!
    I live in the city of Folsom, California, one of the most beautiful places to live. Two homes down the street from me just sold on foreclosure after being on the market for over 14 months for $450,000 when it was selling for over $750,000 18 months ago. Nothing is selling unless there's a huge haircut. These are good people with jobs just walking away from their homes as the mortgages reset and they cannot afford the payments. Why can't the mortgage holders sell these homes back to these people at the lower prices based on current value. It would be a lot cheaper just to do that and it would eliminate the mortgage crisis. If we can uselessly throw away over $500 billion of taxpayers money on the Iraqis why not give it to our own people? What's happening is a planned shifting of wealth from the masses to the ultra rich. It happens like clockwork every 8 to 10 years - we had it in the early 70s with Nixon, in the 80s with Reagan, in the 90s with Bush Sr and in 2000 with Bush Jr. And by the way, all Republican Presidencies!!!!
    Reply | Link to Comment
  •  
    Aug 28 01:26 PM
    Californians like to buy homes because it is the most livable state in the country - in terms of latitude & attitude!
    Reply | Link to Comment
  •  
    Aug 28 02:36 PM
    How much property have you bought lately? Or should I say, How much property do you have for sale? Housing will be in the toilet for years to come. Wait till the arms reset in 2011. You think property is cheap now!
    Reply | Link to Comment
  •  
    Aug 28 07:50 PM
    Supply has radically shrink in better SCA markets over the past 2 quarters - from 12-15 months to as low as 3-4 months . Multiple offers are happing on better properites. Inventory has dried up altogether in a number of beach close areas I travel through.

    Remember the homeownership rate in CA remained among the bottom 5 in the country during the boom, never exceeding about 58%. There is pent up demand, it can afford current prices and it is acting now

    Builders are beginning to shop for lots again

    If you want to live in Banning, Hemet or Moreno Valley - hang in there and wait another year or two.


    The permabears have beaten themseleves on the head for so long with their incessant repetition of belief that they have become numb to the facts. They are the same kind of intellects as the permabulls - unable to accept facts that indicate change in conditions
    Reply | Link to Comment
  •  
    Aug 31 03:17 AM
    Housing must come down to the point where a person can buy it on a 30 year mortgage with 20% down while leaving him money for raising a family. Sorry, a 300k house simply doesn't meet that criteria for most people. Even the old adage of spending 2.5x your gross is really a stretch for most people and it only made sense if housing was going up every year. Well, you can fugging forget that now. If we end up with Japan style deflation like it seems we will, housing went down for over a decade, just like their stock market did.

    I used to live in CA but its too expensive to work there because they want 8% state income tax so they can waste it on stuff that isn't needed. I like working in TX where the property tax is higher but nothing like what it would cost me to pay 8+% income tax.
    Reply | Link to Comment
  •  
    Aug 31 08:02 PM
    Again(harp,harp), mortgages like the one ponzi scheme read off are the real ones that most people got back when we thought that houses were for families and not for that toy BMW.
    Reply | Link to Comment
  •  
    Dec 20 02:00 PM
    Many of us predicted exactly what has happened to California, years ago.

    Take Housing:

    Back in 1998 and even as late as 2002 when everyone was saying to buy homes in places like Los Angeles and San Diego many of us looked with bewilderment. Home prices in these areas were over valued back then and they still are today. The income to housing cost data shows that the median house should cost around 200k in San Diego. This is exactly where prices are headed. Prices will continue to fall with a few small bounces in certain areas, but you will not see a real bottom until 2012 or 2013. When this bottom is put it you will not see a ramp up of any sort. Adjusted for inflation homes in California, particularly in Los Angeles and San Diego will be lower 15 years from now. There is no catalyst for a California housing boom. California no longer gets the huge influx of migrants from other parts of the United States. These educated folk that California could count on since after WWII no longer chose California. In fact, the educated are leaving California in droves, destined for much better managed states such as Texas, Colorado, Oregon, Utah, Nevada, and Arizona. Georgia and the Carolina's as well. The demographic shift spells longer term, certain trouble for Southern California real estate. The uneducated hispanic population is not going to produce the wealth needed to support sky high home valuations. This will begin to be evident by 2025. Those who chose to call this comment racist, then be my guest. I don't care. The long term forecast for the entire state of California is dismal at best.
    Reply | Link to Comment
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