California Housing Market Showing Signs of Stabilizing
California’s housing market is showing some signs of stability as the rest of the nation’s real estate sectors continue to be shrouded in uncertainty. California home prices have risen for nine consecutive months, and posted a more than 10 percent gain, year-to-year, in July. The state’s median price for homes is at $315,000, almost doubling the national median of $183,000.
Coastal regions of the state have seen the biggest price increases. San Francisco posted the largest yearly gain of any metro area in the US in July, as prices gained 14.3 percent over the last twelve months. The median for San Francisco homes is now over $600,000. San Diego’s home prices, meanwhile, have climbed 11.2 percent, to a median price of $389,000. Los Angeles has seen its median rise to $345,000, and prices have gained 9.2 percent in the city over the last year.
Of the four states hit hardest by the housing crash, California so far is the only one enjoying such a rise in prices. Florida, Arizona, and Nevada are still mired in the depths of the housing crunch. Analysts presume this is because California’s prices sunk so far and so fast. The reason the rebound didn’t begin sooner was the flood of foreclosures spurred by the subprime mortgage meltdown. Real estate had become so expensive in California during the housing peak that many families were forced to overextend themselves with exotic loans.
But those days are gone. The majority of those subprime mortgage-related loans have defaulted and the foreclosed properties resold. It took an average of only 44 days for a foreclosure property to sell in July, meaning that those discounted properties didn’t sit on the market, bringing down average values for months or even years, like in other states.
Also, the overall economy of California is improving. Even mired in the depths of the worst US recession since the Great Depression, the state’s economy has remained one of the world’s ten largest, thanks to the heavy presence of multiple industries like aerospace, technology, software, finance, and others. So, every time there is an influx of new jobs to any of those industries, California’s demand for housing spikes, too.
Another factor in California’s home price recovery has been a decided trend toward more short sales and less foreclosures. Homes sold in a short sale are generally lived in and maintained by the sellers until they’re sold, whereas foreclosed homes are often abandoned and left in a general state of disrepair, so short sale homes are typically more valuable than foreclosed properties.
Also driving up prices is the lack of room to grow. Builders have very little room to develop new housing tracts, which drives up the value of existing property. The other three bubble states, Nevada, Arizona, and Florida; all have ample room for new developments to go up, which causes demand for existing homes to drop.
For Americans selling homes in other parts of the country, what’s occurring in California should provide some encouragement, especially considering that trends regularly begin on the coast and move inland. Perhaps the rebound happening in California will be enjoyed by the rest of the nation soon.