On this site I have been tracking the real estate markets of Sacramento and Las Vegas plus commentary about the overall California housing market. I write about these markets because I am familiar with them and they were the most explosive during the housing bubble and hardest hit when the bubble popped.

Sacramento finished 2008 with another monthly sales increase in December. Sales were 90% higher than in December 2007 and 6% greater than the November numbers. Sacramento started showing year-over-year increases in home sales in May and finished the year with 8 straight months of higher year-over-year sales. During the year available inventory fell by 32% and now is at a 3.5 to 4 month supply.

Median and per square foot prices continued to decline through the year. I found an interesting item among the pricing facts. The average price for bank owned property (REO) fell by 34%. For non-REO properties both the median price and per square foot averages were down by a more moderate 20%.

REO sales drove the market in 2008, increasing by 200% and making up about 2/3 of all sales. The hot sector in the market is REO properties selling for under $200k. Continued REO sales in this bracket will continue to have a negative effect on average prices.

New home sales have fallen in a hole that they will not come out of for a while. With buyers looking for deals in the foreclosure market, only about 170 new home sold in November (the last month for which I have data). The existing home market is now exceeding 3,000 sales per month. Currently new homes are selling at a pace 60% lower than in 2007.

The affordability of homes has brought out buyers for the last 2/3 of 2008, but the median prices continued to fall. With mortgage rates near 5% is is now cheaper to buy than rent for those that can get a mortgage and cash buyers of rental homes are getting a better than 10% income stream from their investments. The supply side of the equation is warped by bank owned properties that are dumped with little regard to the selling price. Almost nonexistant new home building will eventually tighten the supply side, but the overall California economic health needs a boost before that happens.