Median Price Up for Second Month in Row
By Robert Kleinhenz, Ph.D. Deputy Chief Economist
The median price of a home in California rose two consecutive months for the first time in nearly two years, beckoning calls for a bottom in home prices. The statewide median price of an existing detached home rose from $253,040 in March to $256,700 in April. The 1.4 percent monthly gain was the second in a row after a 2.2 percent gain in March. Despite month-to-month gains, the median price continued its string of year-to-year decreases, declining 36.5 percent from the April 2008 median of $404,470.
The California median price experienced unprecedented volatility over the period from September 2007 through January 2009. During that period, monthly declines in the median price were consistently large if not record setting. Similarly, the market experienced an unprecedented string of double-digit year-to-year percentages since late 2007, nearly all in the 20 to 40 percent range. While recent rates of change were still large by historic standards, they are expected to diminish in magnitude over the course of the next few months.
Sales of existing detached homes remained in April with 540,360 homes sold on a seasonally adjusted and annualized basis, a gain of 3.2 percent from the March figure of 523,490 and 49.2 percent above last year?s April sales of 362,170 homes. April sales fell short of January and February when sales exceeded 620,000 homes but were strong by any other standard. The high levels of sales over the first four months of 2009 may be attributed to large increases in sales in lowerpriced lower priced inland markets where high concentrations of distressed sales have forced steep price reductions.
So have prices hit bottom? There is no simple answer. The statewide median has remained at roughly $250,000 for four months running in what appears to be a bottom. If the flattening out of prices at vastly more affordable levels entices buyers off the fence, the median price could hold at its present level or even experience some upward momentum. However, the weak economy and an anticipated peak in foreclosures later this year may limit or more than offset that momentum and drive prices below their present levels sometime between
now and early in 2010.
In the end, it is still not clear that home prices have hit bottom. Regardless, the desire to get a home at the lowest possible price must be balanced with obtaining a favorable mortgage rate and finding a home that will meet the buyer?s needs over a 5 to 10 year time horizon.
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