Last year, when the rest of the nation's housing was still reeling from recession, California started to show signs of life.
Sales increased and prices stabilized, despite the fact that it was one of the hardest hit states with one of the highest foreclosure rates.
California's savior was investors.
They came in fast, cash in hand, and started snatching up distressed properties at a fast pace.
That interest appears to be waning.
While sales of existing homes shot up across most of the nation in April, they fell in the West, down 6.2 percent.
"The sales are lower because of lack of inventory on lower-priced homes," says Lawrence Yun of the National Association of Realtors. "The California market was one of the first markets to go down sharply but also the first market to rebound."
The inventory of low-priced homes is low because of big investor demand initially and because banks are being very careful with REO (bank owned) properties, releasing them slowly onto the market so as not to tank prices.
But that's not all of it.
"We know the tax-credit has pushed low-priced houses up sharply and investors have backed away big-time in recent months, not wanting to compete with a bunch of first-timers and their Obama coupons," says mortgage analyst Mark Hanson. "Perhaps this is the end of the demand cycle from first timers and investors who have had their fill."
On the other hand, some of the numbers may be skewed due to the increasing prevalence of short sales, where the bank allows the home to be sold for less than the value of the mortgage.
