By: Robert Kleinhenz, deputy chief economist and Oscar Wei, senior research analyst
As the economy continued to improve slowly and mortgage rates remained at historic low levels, home sales activity in California was on par with the first quarter of last year when tax credits prompted housing demand to increase as home buyers took advantage of the tax incentive. Sales of existing single-family homes totaled a seasonally adjusted annualized rate of 519,870 in the first quarter of 2011, an increase of 6.7 percent from 487,050 in the fourth quarter of last year, and virtually unchanged from the first quarter of 2010 after declining consecutively for four quarters on a year-to-year basis. The statewide median price of $278,430 in the first quarter of 2011 was the lowest since the second quarter of 2009, as deeply-discounted distressed sales continued to make up more than half of all sales throughout the state. The median price declined for the third straight quarter, but remained 12.4 percent higher than the cyclical low of $247,630 reached in the first quarter of 2009.
Home sales activity in Southern California trailed behind the sales level of the state with first-quarter sales (non-seasonally-adjusted) decreasing 3.2 percent on a year-to-year basis. The region has experienced year-over-year declines since the fourth quarter of 2009. The median price for Southern California experienced the first year-over-year decline since the third quarter of 2009, decreasing 1.1 percent to $289,080 from the first quarter of 2010. Despite the recent decreases, county median prices across the region remain above their low points in this cycle.
Sales growth in the Bay Area was slightly stronger than that of the Southern California region and that of the state. Sales of existing detached homes in the Bay Area increased 1.7 percent year-to-year in the first quarter of 2011, slightly higher than the growth rate of the state. The median price for the Bay Area dropped 3.6 percent year-over-year to $465,900 for the first quarter of 2011.
Overall, housing activity in the Central Valley region fared better than the previous year, but sales growth across the region varied from county to county. For example, when compared to the previous year, sales in the first quarter of 2011 increased 9.1 percent for Fresno and 6.0 percent for Sacramento, but declined 11.5 percent for Madera and 12.2 percent for Merced. Price trends, however, were more consistent across the region. Median prices for all but one of the above counties experienced year-over-year decline ranging from 3.2 percent to 14.0 percent. Merced was the only county with a year-to-year increase of 6.8 percent from the first quarter of 2010.
Lower-priced counties in Southern California (Riverside, San Bernardino), the Bay Area (Solano), and the Central Valley (Merced, Madera) all experienced a larger boost in sales from the tax credits in the first quarter of last year compared to the state as a whole. Moreover, economic conditions have stabilized throughout the state, but recovery in these county economies has lagged the state with somewhat weaker sales in the first quarter of this year. As a result, the year-to-year declines in the first quarter of 2011 were somewhat larger in these counties than for the state as a whole. By contrast, most Bay Area counties received a smaller boost to sales from the tax credits last year, and were farther along the road to recovery in the first quarter of this year, so the year-to-year comparisons were somewhat better.
While state, regional, and county home sales are generally lower than one or two years ago, they remain on track to hit the levels seen in the pre-peak years of the late 1990s and early 2000s that are equivalent to the sustainable sales in the California housing market over the next few years. As for home prices, most counties will avoid a double-dip to the lows that were experienced in early 2009, but will experience softness over the coming months until improving economic conditions create more jobs and brighten consumer sentiment.
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