Nov 2008 

Sales Increased As Distressed Sales Surged at the Regional Level
By: Oscar Wei, Senior Research Analyst & Robert Kleinhenz, Ph.D. Deputy Chief Economist

Sales during the month of November generally improved over last year in all parts of the state, while median prices continued to decline at significant rates. Sales in the Central Valley and Southern California performed better than the Bay Area, although these gains were due primarily to the surge in distressed sales with steeply discounted prices. By comparison, the Bay Area has experienced weakness in sales because of prevailing high prices and the scarcity of jumbo loans.

Bay Area
Following the sales trend of the state, home sales in the San Francisco Bay Area declined sharply in the last quarter of 2007, and hit the recent record low in January 2008. Sales of existing single-family homes in the region have bounced back since then and trailed last year by only 1.6 percent year-to-date through November. Sales activity was mainly driven by higher sales levels in Solano and Sonoma counties, both of which have had high concentrations of distressed sales. Other counties in the Bay Area have experienced sales decreases compared with a year earlier, as a lack of funding for jumbo loans has choked off a significant portion of activity in these markets. The supply of homes in the region decreased considerably as sales surged. The unsold inventory index for November fell to 7.2 months from 8.5 months for the same month of last year.

The increase in sales was directly related to the decline in home prices across the region. The median price as of November 2008 was $473,510, a decline of 40.3 percent from the same month of 2007. The median price fell in each of the Bay Area counties, with Alameda having the biggest decline of 39.5 percent and Marin having the smallest of 16.4 percent.

Southern California
Sales activity in Southern California was much stronger relative to the Bay Area, soaring 27.3 percent year-to-date through November 2008. Sales growth was largest in Riverside/San Bernardino where year-to-date sales increased 94.4 percent from 2007; this was due primarily to the large share of distressed properties in the area. Foreclosures, REOs, and short sales in the two counties accounted for more than half of all sales. The surge in the demand for homes also led to the tightening of home supply. The unsold inventory index for Southern California in November 2008 fell dramatically to 7.1 months from 17.1 months in the same month of last year.

The median price for Southern California decreased 40.2 percent from $484,630 in November 2007 to $290,670 in November 2008. Home prices fell in all counties with the largest decreases in the Inland Empire, again because of the high concentration of distressed sales in that area.

Other California Regions
Counties in the Central Valley region experienced a steep decline in sales in 2007, but rebounded in 2008, again because of significant increases in distressed sales. Year-to-date sales of existing single-family homes through November increased 159.6 percent for Merced, 84.5 percent for Sacramento, 77.2 percent for Kern, and 48.1 percent for Fresno. Median prices changes in the area were on par with that of the state, ranging from a decline of 35.8 percent in Fresno to a decline of 47.6 percent in Merced.

Other parts of California also followed the upward sales trend of the state, with some regions increasing more than the others. The Central Coast experienced strong growth in sales with a 32.3 percent increase on a year-to-date basis. The Northern Wine Country increased 12.4 percent, but the Northern California region was up only slightly by 0.3 percent. Prices declined by double-digits in all of these regions.

Throughout most of 2008, sales have improved in California and its regions, in contrast to the national trend which has generally been flat since September 2007. However, California’s prices have declined by far more than the national median price, which has only recently begun to experience double-digit percentage decreases.

To learn more about our Trends Newsletter, please contact the Research & Economics Department at  research@car.org or (213) 739-8352.