by Robert A. Kleinhenz, Ph.D., Deputy Chief Economist

The California housing market showed more signs of emerging from the worst of the market downturn in June as the median price rose for the fourth straight month and sales registered significant year-to-year and year-to-date gains.

At $274,740 in June, the median price rose to its highest level so far this year and stood 4.2 percent higher than the May revised median price of $263,600. The median remained well below levels of a year earlier, however, with a 26.4 percent decrease from the June 2008 median of $373,100. Year-to-year changes have been less severe in recent months and the June decrease was the smallest since February 2008.

June sales dipped 6.0 percent from revised May sales of 546,750 homes to a June sales figure of 514,110 homes, but showed a 20.1 percent increase over prior year sales of 427,910 homes. This was the smallest percentage gain in a year, and smaller gains are expected through the rest of the year. Still, sales in the first half of the year exceeded the same period a year ago by 50.6 percent and annual sales for all of 2009 are expected to be 25 percent ahead of last year’s pace.

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With an unsold inventory index in June at 4.1 months, the supply of homes has decreased steadily since the start of the year when the index stood at 6.6 months. The index is now 3.5 months lower than a year earlier and well below the peak of 16.6 months in early 2008. In fact, low inventories may constrain sales and contribute to upward pressure on home prices through the rest of the busy season.

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The mix of sales has changed dramatically since the beginning of the year. In January 2009, the price segment under $500,000 accounted for 85.0 percent of the total market, the segment between $500,000 and $1 million made up 12.4 percent of the total, and the segment above $1 million made up 2.7 percent of the total. By June, the segment under $500,000 fell to 76.5 percent, middle segment rose to 18.2 percent, and the upper segment doubled to 5.4 percent of the total market. A year earlier, the respective market shares were 67.1 percent, 23.8 percent, and 9.1 percent.

The market continues to cope with a large number of distressed sales in many parts of the state, especially inland areas where 2/3 or more of the market consists of distressed properties. Still, the market share of distressed properties has declined in many parts of the state from March to June of this year, contributing to the median price gains across the state.