Four or five years ago, California’s real estate market was generating a slew of negative headlines. Home prices were plummeting, inventory was piling up, and frustrated homeowners were walking away from their homes.
California housing markets are once more making headlines. But this time, it’s mostly good news for homeowners.
Home prices are rising at a record pace in many parts of the state. Inventories have shrunk by 50% or more in some cities. Home buyers are hovering at the ready, anxiously waiting for the next house to come on the market – and bidding well above asking price in some cases. “Transformation” doesn’t begin to describe it.
California Real Estate Trends, as of August 2013
Here are some of the California real estate trends making headlines right now:
- According to CoreLogic, a financial data and analytics company, the California real estate market currently has the second-highest level of home-price appreciation of any state in the country, behind Nevada. Including distressed sales, California house prices rose by 21.4% from June 2012 to June 2013. Excluding distressed sales, prices rose by a healthy 18.7% annually.
- In June, the median sale price for the nine-county San Francisco Bay Area rose at its fastest pace ever. During that month, the median price paid for homes in the Bay Area rose to $555,000 – the highest level since December 2007, before the housing market crashed.
- Home values in the San Francisco metro area rose by 24.5% from May 2012 to May 2013. This is according to the latest release of the Case-Shiller Home Price Index, which was published at the end of July. Prices in and around the city jumped by more than 4% in a single month, from April to May of this year.
- In the Southern California housing market, the median sale price rose by 28% in June, year over year. That was the largest annual gain since 1989.
- Home prices in San Diego climbed 17% during the 12-month period mentioned above.
- According to the monthly housing summary provided by Realtor.com, median list prices have risen by more than 20% annually in all major California real estate markets. The largest annual increases occurred in Oakland (+37%) and Sacramento (+34%).
- Los Angeles house values rose 19.2% in May, compared to a year earlier. According to a Los Angeles Times report, house flipping is making a comeback in L.A. and other Southern California real estate markets. “In May, investors flipped 1,377 homes – a level not seen since the height of the housing boom,” said the report.
- Another positive trend: According to the California Association of Realtors, the percentage of distressed (foreclosure) home sales continues to decline across the state. Distressed property sales only accounted for about 20% of overall sales in June, down from 42.2% in June of last year.
- Inventory is still the big story in most California metro-level housing markets. Inventories have dropped significantly in most cities, over the last couple of years. This forces buyers to compete more aggressively for fewer properties.
- “Despite a small increase in inventory, the supply of housing remains tight in most parts of the state and continues to fuel home price increases,” said Don Faught, president of the California Association of Realtors.
2014 Prediction: Cooling Markets, But Additional Price Gains
Given the current supply-and-demand situation across the state, home prices in most California cities will likely continue to rise well into 2014. But the gains will not be as significant as they were over the past year. Inventories are starting to level off in most metro areas. We are also seeing some price cooling, in both the year-over-year and monthly categories.
Rising home prices will give California homeowners more options. Many homeowners who were unable to sell in the past, due to equity losses, will suddenly be able to sell. This will bring more homes onto the market to meet higher levels of demand.
All of this will reduce the upward momentum of home prices. We are starting to see signs of this already. Still, it’s a good time to be a homeowner in the California housing market – and it will be for some time.
Disclaimer: The latter portion of this report contains forward-looking statements / predictions about the California real estate market. These statements are the sole opinion of the author and should not be construed as facts or financial advice. We make no guarantees about future conditions within the economy in general, or the housing market in particular.