Home Prices Continue to Rise in Southern California
No one is buying homes.
No one is building homes.
But home prices are continuing to rise.
Except for a little exaggeration in two of the three previous statements, that’s the state of the California housing market as spring 2007 turns to summer.
For all the talk of supply and demand, the housing market is so tight in some sectors that even recalcitrant buyers don’t seem to make much difference in what sellers can charge.
The median price of a home in California hit $597,640 in April, an all-time high, but the California Association of Realtors’ chief economist says that number is at least a little misleading.
“Although the median price continues to rise, this reflects the fall-off in sales in the lower priced markets of the state where new home inventories and foreclosures are competing with the existing home market,” Leslie Appleton-Young said in a release.
“Fewer sales from these regions coupled with modest gains in some of the stronger coastal markets are pushing the median price for the state up slightly.”
It’s another of the anomalies of the current market that there isn’t enough so-called “affordable housing” and what there is isn’t selling well.
“April sales fell in part because of tight [California mortgage] standards and growing concern about the impact of subprime mortgages on the market,” said Colleen Badagliacco, CAR’s president.
“Throughout the state, inventory levels have increased to their highest levels in recent years, giving buyers more time to view a greater variety of homes and sellers who set realistic home prices an edge in the market.”
That has been especially true locally, where the prices would-be sellers are asking have been falling by as much as 10-15 percent.
Some local real-estate professionals have said that most of the houses that do sell, while they’re selling for less than the original asking price, are still drawing decent prices.
That’s reflected in the Inland Empire numbers. While sales in Riverside-San Bernardino were down 44.6 percent from April 2006, the median price of homes sold was up 1.5 percent to $401,670.
Builders clearly have scaled down their projects.
According to the California Building Industry Association, housing starts in April fell 24 percent from March. Single-family home starts were down 37 percent from a year ago.
During the first four months of 2007, even with mortgage rates so low, housing starts were 28 percent lower than the same period in 2006.
Chief economist Alan Nevin said in a release that fully half of the state’s decline in single-family housing was in three areas - San Diego, Sacramento and the Inland Empire.
Oddly enough, the upper end of the market, both in Los Angeles, Orange County and in the San Francisco Bay area, is fairly strong.
“There is a lot of strength in the $1 million market in Los Angeles,” said Jack Kyser, chief economist with the L.A. County Economic Development Corp. “That makes the median numbers somewhat misleading.”
Kyser said it remains a “very tough market” and probably will for the rest of the year.
“All the lenders are being much more particular in their documentation of loans,” he said. “After the bad credit mortgage meltdown, they are really being sticklers. That’s taking a lot of people out of the entry-level market and that in turn is congealing the move-up market.”
So for now at least, it’s a market in which homes aren’t being built or sold, but they’re still expensive.
Does it make sense?
Kyser shrugs. “I think it will be 2008 before we see anything that could be called stability in the market.”
SOURCE: Inland Valley Daily Bulletin