California’s Housing Market Works

Professor Perry at Carpe Diem hits a home-run:

cahomes

Bottom Line (from Prof Perry): The way the media reports it, you would think we were years away from a solid recovery in the real estate market, especially in states like California, when some of the housing data suggest otherwise. The 40.5% fall in California home prices is helping to stimulate home sales there, as the Law of Demand would predict.

Overall sales volume has increased in California by 20.5%, from $1.32 billion a year ago to $1.58 billion in January this year, the Inventory Index has decreased by almost 10 months, and the median number of days to sell a home decreased by almost 21 days. In other words, market forces are working in the California real estate market.

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30 Responses to “California’s Housing Market Works”


  1. 1 LK Economics March 5, 2009 at 1:43 PM

    Hooray! Great News! I was happy to read good news about the economy especially in my home state. The housing market is more resonable and affordable for those who work and live in California. I grew up in California only to see the prices of home go way beyond my reach. I only wish I had extra money to buy up a property or two. The last few years I kept looking at the housing prices thinking to myself how will I ever afford a home in my community. Thanks for shining the light on the real estate economy.

  2. 2 janeth f. March 5, 2009 at 2:22 PM

    The media does make such a big deal about everything and this is actually surprising. I didn’t know the housing market was doing so well. This graph helps to see the difference of how it was a year ago. I actually thought the sales would be going further down. But aren’t the prices still going down? Or are they staying at a certain level? Because i know someone whos house went down in value a whole lot. Does this graph mean that property is going up?

  3. 3 Jhovany G. March 6, 2009 at 10:32 AM

    I find this a little confusing, only because our unemployment rate is so high this year, but our real estate is doing better this year than last year. Aren’t people losing jobs and getting cuts in their salaries? However, real estate is doing good. I guess you also have to consider the lower costs of homes compared from January 2009 to January 2008. It does sound like a good idea to invest now in real estate if you can afford and perhaps you’ll make profit in later years, only if we get out of this recession.

  4. 4 Michael Huddleston March 7, 2009 at 7:34 PM

    I remember when housing prices in California was at a rediculous high, especially those in the Napa County. It is nice to finally see the prices coming down enough that once again owning a home in Napa is possible. My grandparents bought their house 40-50 years ago for a mere $17,000, the equivalent to my kia. My parents bought their house less than 10 years ago for a staggering $350K where an equal sized home would be worth $700k just a few years later. So I am thrilled to see prices coming down. Housing will always be a good, strong investment.

  5. 5 Linda Villasenor March 8, 2009 at 12:21 PM

    Yeah there are a lot of houses that are on the market for low prices and it’s a great time to buy houses but the fact that many people are loosing their jobs scares them into buying a house. My family was looking at the houses in Oregon and they were cheaper and they were going to get a house but because they are afraid of loosing their jobs they didn’t get it. They are afraid of not being able to pay the mortgage and loose the down payment.

  6. 6 SMCecon March 8, 2009 at 4:20 PM

    That could be good news and it could also be bad news. It seems to be good news in that the real estate market in California isn’t tanking as much as predicted and isn’t following the current pattern of the economy. However I am nervous to accept this information as totally good news. Who are the people who are buying these properties. Are they all wealthy, already well-off people who are simply looking to take advantage of low prices? Or are they lower working class people who are finally able to buy a home at a reasonable price? If it were the latter it would be the best news of all.

  7. 7 wordtown March 8, 2009 at 9:16 PM

    It’s weird to see how a pricy house went from 600,000 to being worth less then half then what bought for. The real estate is good for those that saved up money to buy a house in the near future. Now would be the time to buy a house if you got the money. Sooner or later the prices will slowly start to rise.

  8. 8 ace1989 March 10, 2009 at 7:26 AM

    this is good for alot of people but bad for others. some people who bought homes at $600,000 now need money and try to refinance and cant borrow against there homes cause they are not worth half as much. but on the bright side this is good for people who need homes at a lower price.

  9. 9 samandrews March 10, 2009 at 11:41 AM

    I couldn’t be more excited about the price of homes for sale right now! Being young and out to buy a home for the first time is a struggle, especially with the astronomical prices these California properties are going for. However that was last year and things have changed. Right now its good to buy and bad to sell. Sure, buying one couldn’t be easier, but sellers are taking a big loss on the deal. If you can’t sell it for more than you bought it for, then you’re in a pickle. Happy that more homes are selling but sad that they’re at such a low value.

  10. 10 mrrodenas March 10, 2009 at 6:58 PM

    In my opinion, California’s real state market was way overpriced to start with. It is exciting to realize that demand and supply works sometimes for the common good as well, with emphasis on the “commom”, since common hard-working middle-class citizens had restricted access to the previous inflated market. I still find it expensive when comparing to real state markets in other West Coast locations such as Oregon or Colorado, ans hope that investors do not drive hopeful-to-be future property owners out of the game again. AFter all, we work here, play here, pay taxes here…it would be nice to own here as well!

  11. 11 Ricardo Olmos March 11, 2009 at 5:00 PM

    The california house market does and does’nt work. It depends what angle one is looking at the real-estate market. If a home is being forclosed, the owner has to give up the house to those who can afford it. This only benifits the pople who are in the house market currently. I dont think that is very many people who can afford to, yet those who can jump right on the opportunity aquire a cheap asset. Compared to last year we are doing better, but the ecomomy is still on a down slope. I honestly think that the increase of sales just means the market is saturated. Therfore those who can aford will take advantage of the oppertunity.

  12. 12 Rachel Sturm March 12, 2009 at 7:15 AM

    While it is good to see that the housing market is making a comeback, it comes at a price. it is a buyers market at this point and the low prices of the homes while good in the short run may, i think, hurt us in the long run. A lower price means less money is being put through our system via investment. in the recession, it seems like the more confidence that the comsumers have, the better for our economy, which i think means that it would be better if the home prices raised at least a little bit to increase country wide investment.

  13. 13 Arnulfo Solorio March 13, 2009 at 9:00 AM

    Hi all,
    It is good and bad news to me. Good news because a lot of peiple will be able to buy a house if they can get a loan. I understand that last year or year before it was easier to get a loan for half a million even if you were making ten dollars per hour. Now that the house prices are lower people can not get a smaller loan. People are losing their jobs or cutting back hours and lost their retirement plan. The question is if if I had money I would buy now. Yes that is if if I had a job or had money. The bad news is for many of the people who bought high and got a huge loan. Now they are losing their houses and I do not know what they will do specially if they lost their job. Does any body know what will happen to these people’s credit? or if they will have to pay the loan? I know that many may get help from the government but not all.

  14. 14 nancy moussa March 15, 2009 at 11:03 AM

    Now is the time for people who have been saving up to buy a house. The prices are lower than ever before. the only downfall about this news is that the people who bought a house with all their money and took out loans are still having to pay them off even though thr price of their house has actually gone down. I think that the prices should be increased a little to help give us hope in our investments.

  15. 15 Houck24 March 15, 2009 at 4:06 PM

    Defiantly, housing prices are so low right now that it is defiantly a buyers market and not a sellers marker. I think that houses in California, especially in the Napa Valley reached a ridiculous and unsustainable level. New houses with no backyard were selling for over a million dollars in the Napa Valley and yet you could buy the same house with a huge backyard about 10-20 miles away in Green Valley and it would be for 500,000 or more less than a home in Napa Valley.

  16. 16 khaled Aboudamous March 17, 2009 at 8:10 AM

    This is good news for those who are looking to buy a home, true. I dont want to be the burden of bad news but, one can only ask the question…what about firm home owners? With the economy as bad as it is, their once anticipated homes of 600,000 (like the example in the article) have decreased in value at almost 41%! Obviously this would be a horrible time to sell a home, but to buy would be ideal for those starting up new families and or lives. Im real anxcious to see what happens to real estate in five or six years from now, should be interesting to find out.

  17. 17 Claudio Ramirez March 17, 2009 at 11:33 AM

    I guess to an extent these numbers are a good thing, but if your a homeowner and have been for a long time, the value of your home has decreased significantly in the past 2 years which makes it even harder to get equal market value for what you paid for. Selling alot more houses is a good thing but in the long-run the value of these houses will have to increase.

  18. 18 BeuWolf March 17, 2009 at 1:06 PM

    Thats good news that the house prices are making head way for a recovery, along with retail sales. I was watching a part of the new’s not too long ago that alot of foreign buyers were coming over to the US in the market to buy forclosed homes to take advantage for the housing crisis. Since many of us can’t afford to keep up with morgage payments or no credit out there to lend out. But hey, its a sign that things are getting better!

  19. 19 Frank March 18, 2009 at 11:09 PM

    This really good news to those who are looking to purchase a home. They were ridiculously expensive, but its good to see that more homes are being sold now. It also is good because it means more employment for real estate agents.

  20. 20 quiche March 18, 2009 at 11:14 PM

    Its cheaper to buy a house now because we are in recession and no one can afford to buy a house. Many homes are foreclosing because people can’t afford to pay them. It’s a relatively a good thing for people that can actually afford buying a house right now, but unemployment increased for real estate agents. Putting your home for sale is not the right time because who will buy it? and most of the homes are decreasing in value. I don’t understand how constructionist are still building now houses,condos, or apartments.

  21. 21 O'King Kole March 19, 2009 at 8:14 AM

    It the truth when that the media all was stretches the facts when report that news to the pubic. On the other hand, they do get the publics attention in matters going on in the economy currently. Furthermore, it is good to see that the housing market especially in California increased by 20%, thus making a slow recovery from the downhill plum it mid 2008.

  22. 22 Keith C. March 19, 2009 at 9:51 AM

    After taking Dr. Balassi’s class and considering simple supply and demand, it seems very logical and obvious that homes would begin to sell after prices tumbled. The problem though, was that with such bad news of the economy it appeared as though prices would continue to tumble; but prices hit an equilibrium. The people in this country who had some financial sense saved their money while we were experiencing the boom, and are now reaping the benefits by scooping up properties for “cheap.”

  23. 23 Gaby Corona March 19, 2009 at 10:32 AM

    House prices being this low is such good news for many people, yet not all. People that just bought a house not that long ago, paid a high price for it, now their house value has gone down, but they still have to pay full price. But it is great news for all those who thought they could not afford a house at the moment. Many have been saving money for a long time, now is the time to go ahead and buy a home, prices will not be this low for long.

  24. 24 quique March 19, 2009 at 7:42 PM

    This is great to here because if the real-estate market can get better I feel that it will help in the process of jump starting our economy. But does this mean that people will be able to keep their homes because for a while werent people losing their homes?

  25. 25 Leonardo Sanchez ECON 101 April 29, 2009 at 3:01 PM

    Yes! Great news for our society in the house market. An year ago the house market was worse but a year later it was better.

    Yes it is a little bit confusing because right now unemployment is way up with firing of people and all. Shouldnt the houses be

    at the same level? im guessing people loosing there jobs or that were part of the cuts had apartments? What ever the case it is

    great news to hear our house market is fairing enough against our market!

  26. 26 Matthew Dimech Econ-101 May 5, 2009 at 9:52 PM

    Interesting, and a perfect example of the law of demand. As it states, when prices fall, demand goes up. In doing so, sales have gone up emensly and the housing market has started to recover. slowly but surely, it will return to normal. But just like everything it takes time.

  27. 27 Andrew May 12, 2009 at 4:06 PM

    As someone in college, this looks like a good deal. IF prices fall, that means houses will be more affordable. I know some people are really struggling through the times right now, but it also means that some people will get great deals and thrive on these low prices. I hope this will evolve into signs of recovery for our housing industry.

  28. 28 Kevin Clark st marys May 16, 2009 at 1:35 PM

    It is positive to hear that the market forces are in funcuality in our beautiful state even during one of the worst economic times this nation has ever seenl. However, in thoery the market forces should always be intact and should always be shaping the market. So basically the market forces are doing what we expected them to do at all times anyway. I guess its just nice to know that at least one thing is working like it is suppose to. Another thing that also happened to stay true to its definition is the law of demand. Obviously when the prices of homes drops 40% over a full fiscal year, there is going to be an expected increase in the total quantity of homes sold. But as the chart can show you the number of houses sold almost doubled that of the sales of the same time a yr ago. However, the price of homes being sold was basically halved from a yr ago which is why you only saw a moderate increase in total revenue generated from the real estate market from 1.32 billion to 1.58 billion. Nonetheless a 250 million dollar is better then nothing right at this present time.

  29. 29 Craig K May 20, 2009 at 8:40 PM

    This article is good news for future house owners, and is also good news for current house owners. The drop in the real estate market has cuased house prices to hit rock-bottom, which is always the best time to purchase. For current owners, the positive side may be more subtle, but is still present For those who stuck out the worst of the real estate crisis, they will now see their homes grow in retail value as opposed to droppin,g like they were a year ago Revenues have aleady started to climb, from 1.32 Billion to 1.58 B, and we can expect them to keep rising.

  30. 30 JoAnn Reynolds December 7, 2009 at 5:07 PM

    Actually this is only good news for the future homeowners. The lower prices are just bringing down the prices of the houses that were purchased in the midst of the boom and those homeowners have lost so much value that they can no longer refinance to get the lower interest rate because there isn’t enough equity in their home. So not only are they stuck with the high price paid but they are also stuck with high payments. Now so many are losing income that I see more forclosures on the horizon.


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