Home Prices Continuing Their Ascent in California

Southern California home prices continued their steady ascent in June, rising by 6.4% over the prior month. Home prices rose in each of the six regions reported by DQ News, with Los Angeles and San Diego showing the most pronounced sequential increases. While some industry analysts have rightly pointed out that mix may be driving the sequential increases as higher end homes enter the foreclosure process (particularly many financed with Alt-A loans and pay-option ARMs), I think this argument ultimately misses the point. Whether April 2009 represented the bottom or we have another 5-10% to go (certainly quite possible, particularly as unemployment picks up), the data clearly shows that the home price contraction in Southern California is nearing an end. New supply has come to a screeching halt, affordability is off the charts, and the rent vs. buy equation is clearly in favor of the latter for most parts of California. Further, the $8,000 federal stimulus and the $10,000 state-specific tax credit are making homeownership an incredibly attractive option for first time buyers in what was once considered the most troubled housing market in the country.