Check out this breaking news from Yahoo News. California’s real estate market may be hitting bottom, suggesting housing recovery may follow. Housing prices are showing signs of stability.
Home ownership in California is growing to be affordable again. Now is the time to buy and take advantage of low prices!
California hints at bottom to housing slump
SAN FRANCISCO (Reuters) – California’s battered homes market may be hitting bottom, suggesting a national housing recovery may follow, veteran banking analyst Charles Peabody said on Friday, citing a rebound in home sales as renters become owners.
In many parts of California, buying a house, especially at auction, makes more financial sense than paying rent so home sales have been on the rise recently.
“The key is to try to get some stability in the price of homes, which appears to be happening in California,” Peabody, of the independent research firm Portales Partners, told Reuters by phone on Friday.
As goes California, the most populous state, so goes the rest of the United States, according to Peabody, who warned early on about the pending credit and mortgage market slumps and put “sell” ratings on many banks.
Peabody sees the tumble in California home prices nearing its end and suspects prices elsewhere also will stabilize.
“Since California constitutes 25 percent of the housing stock in the U.S., any stabilization can have a profound impact on national averages,” Peabody said in a recent report.
Home ownership in California is growing affordable again thanks to reasonably low mortgage rates and the fall in home prices, fueled by the firesale of foreclosed homes. As a result, home sales are picking up, foreshadowing a stabilization in home prices before year end, Peabody said.
“By extension, a stabilization in home prices is required before any sustainable rally in financials can be expected,” he said. “It is our belief that we are moving in that direction.”
Peabody said he was uncertain whether stable home prices will stick. For now he sees “a bottom, but not the bottom” for housing and financials, adding that, “We think a temporary bottom in housing is at hand.”
Reasons to believe California home prices will firm may be found in data from the California Association of Realtors, Peabody said.
Notably, buyers are responding to sharply lower home prices. The realtors’ group reports the state’s June home sales rose 17.5 percent from a year earlier while its median home price plunged 37.7 percent. June also marked the third consecutive month of increases in home sales from year-earlier levels in the state.
California’s backlog of homes for sale shrank to 7.7 months of supply in June from 16.8 months in January. The days a home for sale stayed on the market fell to 49.1 in June from 71.6 in January.
June’s supply of homes for sale is well below the national average and approaching the six-month’s supply level of a balanced market, Peabody said.
He noted Lompoc, California home prices are “depressed,” with the local median price down 39.7 percent in June from a year ago. A buyer may find a house in Lompoc that would have cost $500,000 in the hey-dey of the housing boom earlier in the decade now selling at auction for $250,000.
The annual “carrying costs,” or monthly mortgage payments and property taxes, for a home in Lompoc now equates to about 25 percent of the $80,000 gross income of a two-income earning blue-collar household. More important, that $20,000 in annual carrying costs now are in line with rents in Lompoc, where monthly rents run $1,500 to $2,000, Peabody said.
“At last, the carrying cost of purchasing a home equals rental rates, a condition that should lead to more stable home pricing going forward,” he said.
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