By Kevin Chiu
Despite a special state home buyer tax credit, sales of homes in California declined more than 17% from a year ago in September, according to San Diego based real estate research firm DataQuick. The median price for a California home is $265,000, which is 5.6% higher for the year. But with a substantial fall-off in sales since the expiration of the federal tax credit, the driving force behind rising prices may be a thing of the past.
Home prices rose in most areas of the state for almost a year (11 months) after dropping for more than two years as a result of the troubled economy and the foreclosure crisis. Foreclosed homes made up the largest percentage of sales in September, accounting for 35.8% of transactions as bargain hungry home buyers turned out in force to buy homes with record low mortgage rates.
The temporary foreclosure moratorium put in place earlier this month in 23 states is expected to only have a slight impact on California home sales. The special state tax credit for home buyers lasts through July. Sales are likely to remain sluggish, however, over the next year in the Golden State as the market struggles with high unemployment, a weak economy and a high inventory of distressed properties.
The California Association of Realtors forecasts that sales will only rise 2% in 2011 over current sales volume. Home prices rose sharply in many areas across the state, but association economists are discouraging expectations of substantial price appreciation in 2011.
“It’s going to be a three-to-five-year window to work through this,” said Leslie Appleton-Young, the association’s chief economist, who suggests that slight increases in home prices in some areas of the state are likely to be off-set by declines in higher priced single family neighborhoods. The association projects a total of 492,000 existing home sales to close for 2010 compared to 546,500 in 2009.
“California’s housing market will see small increases in both home sales and the median price in 2011 as the housing market and general economy struggle to find their sea legs,” said association president Steve Goddard. “The minor improvement in the housing market next year will be driven by the slow pace of recovery in the economy and modest job growth. Distressed properties will figure prominently in the market next year, but we also expect to see discretionary sellers play a larger role.”