California: Where Housing Will Rebound


NEW YORK (MainStreet) — Culture gurus have long maintained that trends begin in California. Home sellers certainly hope so, as the June numbers on California's home sales market are looking tantalizingly good.

Nationally, home sales remain a mixed bag. According to the National Association of Realtors, pending home sales were up for May by 8.2%, the latest month for which data is available, but existing home sales are down by 0.8%, the NAR says, and the national housing sales market is down 8.8% overall for 2011.

Lawrence Yun, NAR chief economist, calls the existing home sales environment a sign of an uneven recovery, especially as more buyers back out of deals.

“Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market, including an unusual spike in contract cancellations in the past month,” Yun notes. “The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16% of NAR members report a sales contract was cancelled in June, up from 4% in May, which stands out in contrast with the pattern over the past year ... Economic uncertainty and the federal budget debacle may be causing hesitation among some consumers or lenders,” he adds.

But the numbers from California are decent. According to the California Association of Realtors, pending home sales in the Golden State are up for the second straight month, a good trend for the biggest state in the U.S.

CAR says that its Pending Home Sales Index was up 1.9% for the month of June, and better yet, the index was up 4.4% from June 2010.

The outlook going forward is strong too: “Pending home sales have improved in the last couple of months and the next few months should bring continued gains,” notes CAR president Beth L. Peerce. “So much depends on the direction of the economy, going forward. As for the makeup of the market, distressed sales continue to be a significant part of the market, with the split between short sales and REO sales varying greatly across the state.”

The realtor group points to some specific data in its June index to bolster its case that home sales improvements in California should continue:

  • The total share of all distressed property types sold statewide was unchanged in June from May’s revised 47%. The share also was unchanged from a year prior.
  • Of the distressed properties sold statewide, 19% were short sales, a decline from last month’s share of 20% and last year’s share of 21%.
  • Non-distressed sales made up the remaining share of home sales in June at 53%, unchanged from both the previous month and year.

Economists have long used pending home sales as a forward-looking indicator of the housing industry’s health. In California, where trends are born, that indicator is looking better all the time.

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