California Housing Market Looking Strong… Relatively Speaking, of Course

Thanks in large part to a healthy economy and a lack of excess building, California home prices are holding up slightly better than other recently red-hot locales across the U.S., according to the Los Angeles Times.

The nation’s housing slump continued in the third quarter, as prices for homes in such places as Phoenix and Florida’s eastern coast declined compared with a year earlier.

Yet most of California’s biggest markets, including Los Angeles, the Inland Empire and the San Francisco Bay Area, continued to book year-over-year gains, albeit at a much slower pace.

Among the reasons for the better performance: California mortgage rates that remain relatively low, a lack of available land, and the regulatory restrictions that limit new or under-construction homes competing with resale homes. New homes represent about 15 percent of the total state housing market.

Also, the California economy is healthy and most people are keeping up with their mortgage payments, sats Leslie Appleton-Young, chief economist for the California Association of Realtors.

“The data on the economy is fairly good and we’re seeing job growth,” which helps bolster demand for housing.

The California housing market is a step ahead of other parts of the nation because it was the first region to start experiencing double-digit price gains in 2000 and the first to start tapering off. Price increases have been slowing for more than a year, as have sales.

Now, locales are following with their own slowdowns. In California, three of seven major markets depreciated: San Diego County, where the median price declined 2.1 percent to $601,900; Sacramento, which saw prices drop 3.5 percent to $375,400, and Orange County, where the median dipped 0.8 percent to $705,000.

San Diego and Sacramento also happen to be among the state’s biggest new-home markets. Builders in these areas have been readily discounting their prices, putting pressure on existing-home values. Sales haven’t fallen as much in California as they have in some other once-hot markets, however.

Sales of homes in the Golden State fell 28 percent in the third quarter versus a year earlier, the Realtors said. By comparison, Arizona sales plunged 36 percent, Florida mortgage demand is falling as fast as prices once rose, with sales down 37 percent, and nearby Nevada has seen sharp declines of 38 percent. Nationwide, sales are down 12.7 percent.