San Francisco Chronicle - Tuesday, August 26, 2008
California home sales surged last month even while prices plunged a record amount, as buyers snapped up bargains among the state's hundreds of thousands of foreclosed and distressed properties, according to an industry trade group.
The number of existing, single-family houses that traded hands in July leaped an estimated 43.4 percent from a year ago, the California Association of Realtors reported. The median price, however, dropped 40.3 percent to $350,760, the biggest decline since the Realtors began tracking the market.
In the Bay Area, sales increased 6.7 percent, and the median sank 21.2 percent to $663,190.
"We are seeing a robust response to improved affordability," the Realtors' Chief Economist Leslie Appleton-Young said. "But obviously the $64,000 question is when will we be at the bottom? I don't think we'll see that this year."
If the trend continues, it will whittle down for-sale inventories and gradually bolster prices, some industry observers say.
"Of course, we'll have to watch it, but that eventually would help to (drive) price recoveries," said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. "This is the first step toward recovery."
He stressed, however, that it's just an initial step in a long trek.
Additional waves of foreclosures are likely, because thousands of alternative-documentation loans and other exotic mortgages are scheduled to reset to higher monthly payments in the coming months, he said. In addition, sales haven't increased enough yet to substantially reduce the high inventory across the state.
There were 124,487 active listings in California last month, down 5.4 percent from 131,569 a year ago, according to the trade group's member organizations.
Adibi doesn't expect the market to stabilize for at least another year.
Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, had a more bearish take on Monday's numbers.
"It doesn't reflect a recovering housing market; it reflects a broken housing market," he said. "It's a reflection of the fact that foreclosed homes are being liquidated at very low prices."
Indeed, San Diego research firm MDA DataQuick reported that 44.8 percent of all the transactions in July were foreclosure resales, up from 7.6 percent a year ago. The trade group didn't provide a statewide figure, but Appleton-Young said it exceeded 50 percent in certain areas.
Rosen believes that investors, not actual intended occupants, are buying up many if not most of the distressed properties in the hardest hit areas. That will do little to stabilize the markets in those areas, especially if prices fall further and foreclosures continue to climb, he said.
He did note, however, that the price declines reported by the Realtors and others are overstating the extent of the problem for average homeowners. He said the significant numbers of foreclosure resales in outlying areas such as eastern Contra Costa County and throughout the Central Valley are dragging down the aggregate figures for the Bay Area and state. The actual price decline in core urban regions is closer to 10 or 15 percent, he said.
It's the fourth consecutive month of statewide sales volume gains recorded by the trade group, which collects data from more than 90 Realtors' organizations. The numbers contrasted sharply with those reported last week by MDA DataQuick. The research firm - which records all residential sales, not just existing, single-family homes handled by Realtors - said statewide sales climbed only 12.3 percent from a year ago.
Still, both sets of figures are moving in the same direction - more sales, lower prices.