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.