In 2009 the California housing market showed significant signs that the worst may be over. Sales continued to grow, the unsold inventory index decreased, and although the annual median price decreased, the rate of decline was smaller than the previous year. Moreover, November experienced the first year-over-year growth in monthly price since August 2007.
Preliminary sales remained strong in December at 558,320 (seasonally adjusted annualized rate), increasing 23.7 percent year-to-date, 4.0 percent month-over-month and 1.7 percent year-over-year. Annual preliminary sales maintained their momentum at 546,690, also rising 23.7 percent from 441,810 in 2008. The mix of sales reflected a troubled economy and a housing market dominated by distressed sales, with homes under $500,000 making up the majority of sales (78.3 percent on average), while homes in the $500,000 to $999,999 range made up only 17 percent on average and those over $1 million consisted of 4.6 percent of sales. In 2008, homes priced under $500,000 made up 70 percent of sales, those in the $500,000 to $999,999 range were 22.3 percent of sales, and those over $1 million were 7.6 percent. The striking distinction is revealed when a comparison by price category is made to 2005: homes under $500,000 consisted of 48.1 percent of sales on average, while homes in the $500,000 to $999,999 range made up 43.2 percent on average and those over $1 million consisted of 8.7 percent of sales.
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On the supply side, the market showed positive signs with a 32.1 percent year-over-year decrease in the unsold inventory index in December, from 5.6 months in 2008 to 3.8 months in 2009. The index has not been at these low monthly levels since 2005. It averaged 4.7 months for the year, a 48.7 percent decline from 2008. Typically, when the housing supply decreases, it leads to increases in price, and 2009 was no exception. An important caveat applies to the supply situation: supply was lean throughout 2009 in part because lenders appeared to be managing the number of distressed homes entering the supply pipeline, while market uncertainty kept discretionary sellers on the sidelines.
Prices ended the year on a good note with a preliminary December median of $306,820, an 8.4 percent year-over-year rise, continuing the trend of month-over-month gains that started in March. The preliminary annual median price fell 21.1 percent to $274,960, but the rate of decrease was less than the 37.8 percent fall in the annual median price in 2008. The slower pace of the decline is a good sign that the housing market is turning around and will continue with positive activity in 2010.
The year 2009 turned out to be a turning point in the housing market, with many signs of improvement: sales grew, the unsold inventory index shrank, and the median price decreased at a lower pace than in 2008 and showed positive year-over-year growth for the first time in two years. These are good indicators of anticipated improved conditions in the real estate market in 2010.
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