California Housing Market News
California is a huge state and there are various market currents flowing throughout its regions, but at the moment, there are some quite similar trends happening in both Northern and Southern California. Both sections of the state are largely being driven by an increase in demand coupled with a dearth of single family homes, resulting in strong increase in prices throughout the state.
From 2008 to 2011, housing construction was at the lowest level that it had been in years. In 2005, 209,000 permits were issued for new housing units, compared to a low of fewer than 50,000 in 2008. California’s housing market is characterized by its cycles, and this one is operating along the same lines as previous ones, even if it is more pronounced than others. Part of the reason that California’s market is so volatile is because it is typically in the vanguard of trends and change in the United States, which is reflected in the housing market.
As they say, the bigger they are the harder they fall, and this is definitely true of California real estate market in the last 20 years. From 1996 to 2006, median home values more than tripled. The median home value in the California real estate market in 1996 was just over $150,000, but by 2006 it was over $500,000. Of course, once the Recession hit, home values fell sharply, with median values decreasing by over 40%, which was the lowest level in eight years. The median price hit $295,300 at the end of 2011. The steepest declines were seen in the metro areas that had also experienced some of the most major gains like Merced, Modesto, and Stockton.
Even though California housing market is improving, foreclosure rates are still fairly high. At the end of 2011, more than 40% of homes sold were either bank owned or at some stage in the foreclosure process. Although many people may be avoiding foreclosure, there are droves of California homeowners who are severely underwater on their mortgages.
That said, through the beginning of this year, the California real estate market has seen quite the uptick. The low prices (thanks to foreclosures and banks tightening restrictions on just who can obtain a home loan) coupled with a relatively limited amount of properties have resulted in a rapid and significant price increase throughout California, especially in southern California and the Bay Area.
Southern California’s market gains have been driven by a low inventory of for-sale homes. Median home prices in March 2013 were up 8% from February and nearly one-quarter in year-over-year numbers, hitting $345,500. This means that median prices leapt $25,000 in a single month. This is the highest median price since July 2008, before the height of the 2008 crash. Flipping homes is also in vogue again, with 6.1% of homes sold in March having been purchased only 6 months (or less) previously.
Meanwhile, Northern California’s market is also seeing gains and it is one of the most robust in the state. Northern California market like the San Jose real estate market is largely driven by the job market, which is also stronger than most of the state, thanks to Silicon Valley tech companies. Northern California housing market stats are up by 82% from the first quarter of 2012, and closings are up by 48%. New home closings are up 66% in the same period. Because of this, inventory levels in the area are now below equilibrium, resulting in a very short supply of homes compared to the level of interest in buying them. At the moment, there are just under 2,000 finished vacant homes in the area, which is about a 2.7 month supply. Like Southern California, Northern California real estate market may soon be seeing some intense bidding wars as the market stabilizes itself.