California Real Estate: Improving From The Bottom Up
If California is an indicator of the US real estate market, then the tide could be turning.
Just ask realtors like Matthew O’Keefe. As the sales director at Gibson International Realty in Los Angeles, he’s feeling the frenzy that has become the real estate market with first-time home buyers taking advantage of the government tax credit, near-record low interest rates and many buyers seeking deals with the abundance of foreclosed homes.
“I’ve seen my business increase about 300 percent since May,” says O’Keefe, a realtor for six years. “Every year I’ve done better and better, and this year I thought I would be in a difficult situation, but this is going to be my best year ever.”
And it’s a trend across the state. According to the California Association of Realtors, CAR, home sales are now 38 percent higher on a year-to-date basis compared to 2008 and it’s due in large part to the number of distressed properties on the market. In the last 12 months more than 500,000 homes were sold throughout the state and about half involved foreclosed properties.
“Everything under $500,000 is moving fast,” says the realtor group's president-elect, Steve Goddard. “Those are our first-time home buyers in California using the tax credit that the government is giving them. Forty percent say they’re buying because of it.”
So what was doom and gloom for areas hard hit with foreclosures last year, such as the outskirts of Sacramento County in the north and Riverside County in the south, is now starting to look a bit brighter as realtors try to keep up with the demand of bargain hunters.
That’s why Vickie Hill, branch manager at Coldwell Banker Residential Brokerage in Temecula (equidistant to San Diego and Los Angeles on Interstate 10), is happy to work in what is known as The Inland Empire.
Although home prices in the area (southwestern Riverside Co.) have dropped by 30 to 40 percent over the last couple of years, she’s now seeing multiple offers on homes where the median home price was about $166,000 in August 2009, according to CAR (statewide the median price was almost $293,000.)
“Our actual solds are up over 150 percent over the last two years,” she says. "We’ve got a lot of cash out here right now and we’ve got buyers that are trying frantically to buy homes.”
Realtors are also starting to buzz about the high-end real estate market again, where they say buyers are making their move on homes priced over $1 million.
“The values of the higher price points are arguably better than the lower price points, and if you have the money, is going to be a better deal,” says Kris Berg, broker and owner of San Diego Castles Realty.
For those looking for a high priced home, the Golden State is exactly the place to look. According to an annual report by Coldwell Banker Real Estate, California is home to eight out of the ten most expensive real estate markets in the nation with La Jolla topping the list. That’s where the average sales price of a 2,200-square foot home is now about $2,125,000.
“The upper end properties have found a value that’s brought the smart money off the sidelines,” says Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego, “and we’re seeing multimillion dollar homes being purchased with cash.”
But the question is, will the home buying frenzy continue?
While the California realtors trade group reported that home sales in August 2009 increased by 9 percent compared to August 2008, home sales in the state actually dipped about 5 percent between July and August 2009, due to a thinning inventory of foreclosed homes.
To many, it’s a sign that the market could be leveling out in the state, but to others it means we’re just bouncing along the bottom.
According to Andrew LePage, analyst for MDA DataQuick, the San Diego metro area is showing the highest signs of price stability, where the median home price in August 2009 was about $375,700, down just 3 percent from a year ago, based on CAR data. In the north, the median sales price in Sacramento County was about $192,000, down 13 percent from the year before.
"Sacramento county was the first metro area to go into the downturn, but the last four to six months indicate that prices have flattened out and aren’t falling any where near as fast as they were and there are far few foreclosures,” says LePage.
Still, the low inventory of distressed homes could just be temporary, which makes it too soon to say whether California is hitting the bottom of the market.
The real answer depends on the number of foreclosures that could be coming and when they will hit. Right now, many realtors guess that lenders are sitting on defaults or simply haven’t been able to process the backlog of delinquencies. Either way, the uncertainty proves that the housing market remains soft and unpredictable.
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