Are we really, as some in the media have recently stated, out of the recession and headed to better times? A good place to look for indications the economy is heading in the right direction is California. One of the first states to go up as the bubble inflated, it was one of the first to hit bottom.
Across the country, sales of new homes fell almost 17 percent in February from January levels. Comparing year over year sales, February was down over 28 percent from 2010. Analysts were counting on an annualized rate of 290,000 new home sales, but February represented a rate of only 250,000 units.
In addition, the median price of a new home dropped almost 14 percent in February to $202,000. This is the largest month-to-month decline on record. At the same time, sales of existing homes fell 9.6 percent in February even though purchase prices are the lowest since 2002.
California real estate sales data, while not down as dramatically, is in line with the national numbers. From a peak median sales price of slightly under $500,000 in 2006, California's median sales price for all homes and condos is now around $244,000. The median was up 2 percent over January but down 2.4 percent from 2010.
Dragging the market down is the number of "distressed" properties listed for sale. Almost 60 percent of California re-sales were either foreclosures or short sales in February. The number of distressed sales is holding relatively steady for now. Unfortunately, foreclosures continue and more distressed inventory enters the market each week.
As more of these properties come onto the market, the median price will continue to trend downward. In addition, home sales are held back by tight credit and contract cancellations due to appraisals coming in below sales prices.
In general, California's housing market is anything but out of the woods. Although the affordability factor is very positive, the real estate market in the Golden State is anything but golden right now.
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California Homes Market Faces Challenging 2011
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