Surprising 2009 results for California real estate
Southland home sales up; median levels off.
The California real estate market continues to exist under the dark clouds of increasing foreclosure, bank phantom inventory and growing unemployment. In spite of these factors, the state managed to produce some very positive results in the larger markets. Way back in the dark ages of 2008, pundits and their hosts of commenters were adamant that the real estate market would be have reached a bottom until year over year price gains were experienced. Check out these results:
Southern California
SoCal finished 2009 strong with the median December price was 4% higher than in December 2008, the first year-over-year gain since August 2007, when prices were nearing the recent peak. December was the 8th straight month of monthly price increases. The number of December sales was 12% higher than a year earlier.
The increase in meidian price can be attributed to more sales in higher priced areas and less emphasis on the inland, repo market. 20.2% of th 22,338 December sales were for prices greater than $500,000.
Almost 25% of the purchases in December were for cash. Buyers with real money are very interested in homes at these price levels. The average mortgage payment for those who financed was $1,231 per month, 54% below the 2007 peak.
San Francisco Bay Area
According to DataQuick, the Bay area finished 2009 well ahead of 2008, price-wise. The median purchase price of $380.000 was 15% higher than in December of 2008 and 35% above the median low set in March 2009. Real estate experts are starting to believe that history will soon show Spring of 2009 as the market bottom.
According to the records, 22.7% of the homes sold in December 2009 were purchased for cash. The number of sales in the area was 13.6% higher in December 2009 than in the previous December. This market is still skewed towards lower priced homes with most of the sales going at FHA qualifying levels.
Sacramento Region
In the Sacrament region and especially in Sacramento County, foreclosures continue to hold back value gains. Sacramento County finished 2009 with the median price 0.6% above December 2008. Pricing was stronger during the last half of the year and the median foreclosure sale value increased by 4% in December over November. Mike Lyon, the owner of the largest real estate broker in the region had this comment:
…..prices for homes under $300,000 continue to appreciate at rates seen before the 2005 real estate market crash. “We do not see this slowing in the near future until interest rates rise by midyear”, said Michael Lyon, CEO of Lyon Real Estate.
2010
Foreclosures yet to hit the market continue to be the wild card for California prices. In the Sacramento area foreclosures hitting the market wer 22% higher than in December 2008 and 2010 the number is expected to exceed the 2009 levels by 15%.
Goldman Sachs predicts stronger global economic growth
Jim O’Neill of Goldman Sachs makes some pretty bold predictions concerning the global economy for 2010 and 2011. Who wants to go against Goldman?
What a year, what a decade for stocks!
U.S. stocks end down sharply; post big yearly gain – MarketWatch.
The first decade of the 21st century was a tumultuous one for the U.S. stock market. From the end of 1999 to the end of 2009 the major stock indexes had these results:
- DJIA: -9.3%
- S&P 500: -24.1%
- NASDAQ: -44.2%
Not a good decade for buy and hold investors. Remember the decade started out with the 1990’s bull market nearing its peak before the 2002 bear market. Using the total return figures for the S&P 500, the decade started out with 3 down years (2000 to 2002) resulting in a 40% loss then 5 straight positive return years (2003 thru 2007) with the index gaining 67%, putting the index within 1 point of where it closed on 12/31/1999. 2008 saw the S&P 500 give up 37%, putting the decade deep in the whole again.
Following the disastrous 2008, in 2009 the market “climbed a wall of worry” to show nice gains in spite of an economic recession and daily bad economic news. Here are how the indexes fared for all of 2009.
- DJIA: +18.8%
- S&P 500: +23.5%
- NASDAQ: +43.9%
I think these number show the importance of having some sort of system to avoid big losses during the big market dumps. The markets had two in the 2000 to 2009 time span and they have left long term investors in pretty bad shape. The other side of the coin is to make money in the double digit gain years and figure out how to hold on to them. I have been reading a lot of stuff in this area recently and plan to spend some more time writing about asset allocation and market timing in 2009.
California home prices show year-over-year increase!
C.A.R. November sales and price report.
This just in from the California Association of Realtors: Home sales in November were 4.7% higher than a year earlier and the median price was 5.8% higher. That’s right, the median price was almost 6% higher than 12 months earlier!
Housing, especially in California still has a lot of issues to work through, but it is important to note these gains came in a time of serious government problems and unemployment rising to over 12%. The prices that banks were selling repo’d properties for were just too low and smart buyers were snapping them up and either selling for a quick profit or holding for a longer term recovery.
The positive price trend has been on since March-April 2009. Will buyers continue to look for bargains and compete for available inventory or will the “shadow inventory” overpower the number of willing buyers? Time will tell, just nice to see some positive numbers.
Good news on Southern California home prices
Southland home sales up; median levels off.
The October 2009 sales report for Southern California is all good news. The number of sales has now accomplished 16 straight months of year-over-year increases. The percentage of sale of foreclosure properties is dropping, allowing the median sale prices to increase. The median price per square foot has increased for 6 straight months.
Of particular interest, two counties, Orange and San Diego now have year-over-year median price gains. The average price on Orange county for October was almost 4% greater than in October 2008!
There has been a flurry of articles recently on Seeking Alpha concerning the hypothesis that house prices still need to fall about 25% to reach the historic trend line. The trend line commonly used extrapolates the price gains from 1990 until 1999 then shows how prices in the new century zoomed above the trend and have not yet fallen back to the extrapolated values. There is an interesting point in the press release linked above. The median mortgage payment, adjusted for inflation, is currently 46% below the average payment in 1989 and 55% below the typical payment in 2007. Current, very low mortgage rates have bottomed payments well below the historic trend line.
All that remains is to flush the remainder of the 2005-2007 inflated mortgages through the foreclosure system and a new bull market will start in the California real estate market. It appears the price bottom occurred in Spring 2009.
