Spurred by government aid, the California housing market is on the mend. A special $10,000 state tax credit for home buyers to purchase a property after May 1, 2010 is aiding a slumping market that hasn’t seen home prices as low as they got in decades. The bottom of the housing market in California is in the rear-view mirror.
Despite the expired federal tax credit, home sales in the state should continue on a stronger pace as a result of the state program, but that doesn’t mean they’ll be steady. Low mortgage rates and distressed property sales are projected to sustain a recovery in the state’s markets. But the improvement won’t happen quickly.
Home sales have improved over the last two years, but still have a long and winding road to get through the tough economic environment. California still has to recover from high unemployment, the most critical element in a housing market recovery since unemployed workers don’t qualify to buy homes.
The Silicon Valley is one of the places pulling out of the downturn with higher home prices and more sales. But a lack of inventory of lower priced distressed properties, including foreclosures should be aided in the second half of the year as lenders ramp up efforts to take back homes in default. San Jose home prices are forecast to inflate an average of 11.8% for the year. With some of the highest median prices in the country, nearby Los Gatos and Cupertino should edge out slightly better averages.
Up the peninsula in San Francisco, the supply of homes for sale on the market tightened for a while, but seems to be improving even as home values rise. The City by the Bay had seen a huge increase on home and apartment prices during the boom, only to see the market nearly freeze. That’s hardly the case these days as San Francisco edges closer and closer into a full recovery. Home sales should remain fairly strong through the year on forecast housing inflation of 11.9% in 2010.
| City |
Forecast |
| Los Angeles |
9.4% |
| Inland Empire |
7.4% |
| San Diego |
7.4% |
| San Jose |
11.8% |
| San Francisco |
11.9% |
| Oakland |
12.1% |
| Orange County |
8.5% |
| Fresno |
6.1% |
| Bakersfield |
6.9% |
| Sacramento |
7.0% |
Across the bay in Oakland, the inventory of homes hitting the market has more foreclosures than many others, pressuring values. But as bankers slowly release foreclosures to the market in efforts to restrain further deflation and government programs work to trigger stabilization, Oakland should see stronger home values develop with forecast appreciation of 12.1% for the year.
A recovery of sorts in Southern California had been more restrained than up north even as sales rose before slowing again. But home sales should experience an erratic pattern of ups and downs through the Southland over most of the year as Californians come to grips with the fact that there’s not going to be anything fast about recovering from the worst downturn since at least the Great Depression.
No where else has experienced such widespread devastation from the foreclosure crisis as the greater Los Angeles area. But an improving trend in home sales with the help of lower priced distressed properties has helped the area. Another round of lower priced foreclosed homes is beginning to hit the market, and that should aid in the Southland’s recovery with the statewide tax credit.
As a result home prices are projected to rise an average of 9.4% for the year in the Los Angeles area as higher end markets like Bel Air and Newport Beach lead the way into stabilization. With lower housing prices, San Fernando Valley will also experience a healthier trend.
In Orange County, battered with one of the state’s highest levels of mortgage fraud and record foreclosures home sales should also see an improvement on better than expected average inflation for the year forecast at 8.5%.
The Inland Empire, composed of Riverside and San Bernardino counties has made national news for being one of the most severely impacted areas in the foreclosure crisis. The turn around in its markets is projected to be anything but steady as it moves towards stabilization. As businesses start re-hiring, the Inland Empire will see its fortunes improve, and is forecast to see average housing inflation for the year of 7.4% as more bargain priced foreclosures come to the market.
Stronger high-end home sales aided San Diego for a while before the federal tax credit expired. But refinancing by homeowners in doubt of being able to hold on to their homes, and more bank modifications have paved a path towards setting the market up for better days ahead. San Diego is forecast to experience average housing inflation of 7.4% for the year.
The over-supply of foreclosures has sold off substantially in Bakersfield, and the market appears to be turning as home sales rise. The pent-up demand for lower priced foreclosures with low mortgage rates should aid the market’s recovery, which is starting to mend. Bakersfield is forecast to see average housing inflation for the year of 6.9%.
Bank assisted distress sales and foreclosures helped Fresno work through its downturn even as tens of thousands of homeowners lost their homes to foreclosure. The inventory of foreclosures to be listed on the market should boost sales again, and send Fresno to an average forecast appreciation of 6.1% in 2010.
Up the Central Valley, in California’s state capitol city Sacramento has suffered through a record foreclosure crisis, but the increase in home sales has acted to bring the first part of stabilization to its housing market that is projected to sustain through the remainder of the year on forecast appreciation of 7.0% on average.
