Prices, Sales Continue to Fall in California's Housing Market; Inventory Swells
Is the real estate market thawing out? Not in the Golden State, according to a report released Friday by the California Association of Realtors -- home sales decreased 24.5 percent during March in California compared with the same period a year ago, while the median price of an existing home fell 29 percent. The culprit, realtors in the state say, is a frozen mortgage finance market that has led to a lack of available credit in the state's once-burgeoning market for homes above the traditional $417,000 conforming lending limit. "Sales continue to be impacted by problems in the real estate finance sector, which by some measures have eroded since the start of the year," said C.A.R. President William E. Brown. "Sales in 2007 reached their peak last February; going forward, the year-to-year declines in sales should shrink." That sense of optimism is tied to high hopes for the so-called jumbo conforming loan market. Fannie Mae and Freddie Mac were authorized in February to begin purchasing loans up to $729,500 in certain high-cost California housing markets; although the market for these loans hasn't yet begun flowing, experts expect recent pricing commitments by the GSEs to loosen things up in key markets within the state. Closed escrow sales of existing, single-family detached homes in California totaled 318,830 in March at a seasonally adjusted annualized rate, according to the CAR. Statewide home resale activity decreased 24.5 percent from the revised, seasonally-adjusted 422,300 sales pace recorded in March 2007. The median price of an existing, single-family detached home in California during March 2008 was $413,980, a 29 percent decrease from the $582,930 recorded one year ago, and 1.3 percent below February's recorded median. Price declines were widespread, as well: joint data from the CAR and DataQuick Information systems found that only 4.9 percent, or 14 out of 283 cities and communities in the state, posted a price increase in March relative to year-ago pricing. "Both tighter underwriting standards and the ongoing effects of the credit/liquidity crunch continue to constrain sales," said CAR chief economist Leslie Appleton-Young. "Historically, mortgage rates on jumbo loans are 0.2 percent to 0.4 percent higher than those on conforming loans, but the spreads in recent weeks have been as large as 2 percentage points, reflecting an increase in the perceived risk associated with these loans." The slowing sales pace is forcing inventory to pile up, putting the state's housing market further away from a potential recovery -- most economic experts assess inventory as the most critical variable governing the health of a housing market. The CAR said that the inventory of existing, single-family detaches homes in the states rose to 11.6 months of supply during March, compared to 7.6 months of supply one year earlier. For more information, visit http://www.car.org.