California home sales are soaring. What? Aren’t we in the middle of a credit crunch and mortgage industry meltdown?
Bargain shoppers are snapping up distressed property, according to real estate researcher DataQuick. In Northern California sales were up 40% in September, the largest jump in six years. In Southern California sales were up 65%, the largest such increase on record.
While sales are up, those results are from last year’s depressed levels. Prices are still falling. In Northern California prices fell 40% to $400,000 on average. Down South, prices fell 33% to $308,000, an amount not seen in five years. Half of all sales were foreclosures.
If you’re thinking of snapping up that historic Victorian in San Fran or a swanky pad on Malibu’s Billionaire’s Beach for a song, think again. Prices in the most desirable areas haven’t fallen that much. In Frisco the average home will still set you back $675,000, down 12% in the past year. In Los Angeles, prices seem much lower, down 31% to an average of $360,000, but that reflects a lot of working class neighborhoods where prices have fallen most dramatically.
Even the California Association of Realtors, not exactly a group of real estate doomsayers, figures Golden State property values will continue to tumble. The Realtors forecast that prices will decline 6% next year to a statewide median of $350,000. That’s after a 32% drop in 2008.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.