Socal Home Sales Rise in April

Southern California homebuyers stopped looking and started buying again in April. Foreclosures and homes priced under $500,000 were clearly the best sellers, and reflected a 22% jump in sales over March. Even so, sales were off 19% compared to April 2007. The affordability index has changed dramatically due to lower prices and drops in interest rates. A year ago, $100,000 annual income was needed to qualify for a median priced home of $496,120. Inventory of homes for sale has declined significantly in certain price ranges and in certain cities. As an example, in Irvine there were 695 homes on the market in April priced under $800,000. Essentially that means there was only five months of homes for sale, which is described as a “neutral” market. More than six months of inventory is considered a “buyers” market.

The Housing Crisis is Over (sort of)

The grusome headlines coming fast and furious in the press and on TV suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the market is bottoming right now! How can this be? All the subprime problems, foreclosures, short sales, and so forth seem to be getting worse. Well, I don’t think we are going to return to the boom of 2005 anytime soon; maybe another 15 years. The facts are pretty clear, though. The trends are no longer getting worse. Remember, home sales peaked in 2005. New home sales are down 63% since then. Housing starts are off by 50%. So what’s going to stop the decline? The same thing that caused the bust; affordability. Buyers can afford homes again; price wise and loan wise. In real terms, the median price is now at a point where it only takes about 30% of monthly income to afford a home, compared to the high point of nearly 60%. Buyers are buying again! Orange County demand is beginning to grow again, and that’s a cheerful sign.