Real Estate Revival In The Golden State? - By Joe Duarte
California's housing market posted a surprise surge in January, raising the question of whether this is a regional phenomenon or the start of something that will spread throughout the country.
According to Investor's Business Daily (IBD): "Existing-home sales in the Golden State doubled in January from a year ago, pacing an overall 29% gain in the West. By contrast, sales nationwide fell 8.6% from a year ago, led by double-digit drops in each of the other three regions." Indeed, the increase in home buying led to a cut in the total inventory of available homes that "the time it would take to sell the inventory of California homes at the current sales rate dived to 6.7 months from 16.6 months a year ago." In fact, that's close "to the five or six months' supply deemed consistent with a stable market, and well below the nationwide figure of 9.6 months."
So what happened? Prices dropped to levels that finally enticed buyers as "A 40% plunge in the median home price from a year ago has lured buyers despite anxiety over a deep and prolonged recession and mounting job losses." Also interesting is the fact that, according to IBD "Prices have also fallen fast in former bubble markets in Arizona and Nevada."
To be sure, a lot of this activity has to do with foreclosures, where fire sale prices are attracting buyers. According to IBD "50% to 60% of California home sales are foreclosure-related," and Mmore loom as the credit crunch and recession hit a widening swath of the economy." And California is not alone in this trend as sources in parts of Texas have told us recently that a new trend is developing in parts of Dallas, as vulture investors have begun to descend on foreclosed properties, and are remodeling them in order to increase their chances of being sold.
And there seems to be plenty of further growth potential in the sector, if recent data is any indication of what lies ahead as "California foreclosures screamed 134% in February vs. a year earlier to 38,339, Foreclosures.com said Wednesday. Nationwide, foreclosures spiked to a record 121,756, up 67% just from January."
Under the hood, the statistics are increasingly daunting. According to IBD:
* "The share of loan payments at least 30 days late jumped 0.9 percentage point in Q4 from Q3 to 7.88%, the highest since records began in 1972, the Mortgage Bankers Association said last week."
* "Defaults have spread from subprime loans that never should have been made to higher-quality prime mortgages as rising job losses strain homeowners' finances."
* "California's jobless rate shot up to 10.1% in January, the latest month available. U.S. unemployment hit 8.1% in February."
* "Meantime, RealtyTrac estimates there's a "shadow inventory" of 500,000 to 600,000 foreclosed homes nationwide that banks haven't yet brought to market."
Perhaps one of the most unsettling and until recently untold stories is that of what happens to families who lose their homes. To be sure, many end up with families, or moving elsewhere, hopefully making ends meet. Yet, according to the New York Times: "As the recession has deepened, longtime workers who lost their jobs are facing the terror and stigma of homelessness for the first time, including those who have owned or rented for years. Some show up in shelters and on the streets, but others - are the hidden homeless — living doubled up in apartments, in garages or in motels, uncounted in federal homeless data and often receiving little public aid."
Some think that the bottom in housing may be near. Yet, it's unlikely that we'll know for at least several more months.
Conclusion
The current recession started with the housing bubble popping, its effects spreading, and the financial system collapsing to the point where unprecedented government intervention around the world took place.
The damage has spread through all sectors of society, and the consequences, including the current threat on the free enterprise by the left leaning White House, have yet to be fully apparent, much less tallied.
Yet, this is America, where the free markets rule. And this is the Internet age, where information, thus reaction to information happens at the speed of light.
Thus, it's not unrealistic to consider the concept in this way. What used to take months to be disseminated, digested, and acted upon, can now unfold in a matter of minutes.
If you apply that concept to the current recession, or at least the housing crisis, it's now in its 15th month, at least if you count October 2007 as the point of reckoning. Something like this in the past would take years to work its way through the system. But, with the rapid dissemination of information, it's possible that what used to take years, well it's now going to do what it's going to do a lot faster.
That means that it's plausible to consider that maybe, just maybe, some kind of improvement in housing may just be under way.
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