Another Solid Month for California Housing Market

While housing activity on a national basis has declined sharply over the last few months due to the expiration of the $8,000 new homebuyer tax credit, California data for the month of May continues to reflect steady improvement. Given that California led the rest of the country into the housing downturn, it is encouraging to see the region showing concrete evidence of a bounce off the bottom. Notwithstanding the encouraging data from May, June and July will likely show a falloff in activity (similar to the rest of the country), but it is important to put in context the level of healing that has emerged over the last year (see accompanying charts for evidence). Barring a significant decline in the economy, it seems highly unlikely for California to retest the lows in activity and pricing that reflected the state’s housing market in the dark days of early 2009.

As indicated in the chart below, May home sales in Southern California were up 7.2% year-over-year with Los Angeles, Orange County, and San Diego up 12.3%, 22.1%, and 19.6%, respectively. Unit prices were also strong, up 22.5% year-over-year and 7% vs. April 2010. Since bottoming in April 2007 at $247,000, median home prices in SoCal have risen by 23.5% to $305,000. Though prices have risen smartly off the bottom, they are still down 40% from the peak, with pricing in the inland empire down well over 50% off the top.

Similar to Southern California, the Bay Area continues to show significant evidence of a rebound. May home sales were up 11% year over year, with the higher end regions (San Fran, Marin County, Santa Clara) up well over 20%. The trends in pricing were even more encouraging, with prices up 20.1% year-over-year and up 10.8% vs. April. Since bottoming in March 2009 at $290,000, home prices have risen by a sharp 41.4% to $410,000 in May 2010. While mix has undoubtedly padded that figure, all regions tracked by Dataquick have seen pricing up by double digits off the bottom.