The Wall Street Journal
SAN FRANCISCO — California’s median price for an existing single-family house rose for the third straight month, a sign that the state’s battered real-estate market may be bottoming out.
The median sales price increased to $267,570 in May for a California home, an increase of 4.2% from April, according to a report released Thursday by the California Association of Realtors. The inventory of unsold houses continued to drop, to 4.2 months’ supply in May compared with 4.6 months in April and 8.7 months in May 2008. Prices were still well below their year-ago levels, down 30.4% compared with May 2008.
One explanation for the increase in housing prices is that fewer foreclosed properties are among those being sold, said Kirk Lesh, an economist for California Lutheran University’s Center for Economic Research and Forecasting. Banks tend to sell foreclosed houses at lower prices than do people selling their own homes.
California’s real-estate market, the nation’s largest, is seen as a barometer of the U.S. economy. Housing prices soared during the boom, and their plummet during the market’s collapse resulted in massive foreclosures and fueled the recession. Economists say the state’s housing market will lag behind the nation’s in recovering, so any indication of improvement in California bodes well for the rest of the U.S.
With Thursday’s report, real-estate experts said they were a bit more optimistic that the California market is healing. But they warned that the state’s 11.5% unemployment rate could result in more foreclosures and drive down real-estate prices again, as could lawmakers’ plan to slash more than $10 billion from state spending to close a $24 billion deficit.
The budget proposals include laying off thousands of state workers and cutting health and welfare programs for millions of Californians, as well as raising taxes. If enacted, they would further batter the state economy and, consequently, the housing market, said Mr. Lesh, the economist.
The Realtors’ report also said that 556,590 California houses were sold in May, up 35.2% from a year earlier. Sales may increase in coming months because prospective buyers believe the market is at a bottom, said Robert Bridges, a professor at the University of Southern California’s Marshall School of Business. “The ‘buy’ decision would be a wise one right now because those pricing levels are getting attractive,” he said.