Nationwide, prices for existing homes hit their pre-recession levels again in June — but in California and in the desert, prices are still well below those 2007 peaks.
Local agents say that rather than pointing to a weak housing market, those numbers show that California real estate is returning to normalcy.
“Nobody wants to go back to 2007. That was just bad for everybody,” said Beverly Fitzgerald, an agent with Tarbell Realtors and president of the California Desert Association of Realtors. “It’s not like we’re really, really slow. It’s just that it’s not at breakneck speed — and that’s what you want. You want a sustainable market.”
The median sale price for a Coachella Valley home was $295,000 in June, in line with median prices from the past year but still 30 percent below the region’s $420,000 peak in the summer of 2007, according to data from real estate research firm CoreLogic DataQuick.
In Southern California, the median sale price in June was $442,000 — the highest price since October 2007, but still 12 percent below that year’s peak of $505,000.
Nationwide, houses fetched a median price of $236,400, surpassing the July 2006 peak of $230,400, according to the National Association of Realtors.
“California (prices) went up further and faster than the rest of the nation, and we came down a lot harder,” said Leslie Appleton, chief economist with the California Association of Realtors. “Even though national prices are back to their peak, their median is $200,000 less than we are. It’s a very different dynamic.”
Appleton cautioned that the only California counties that have seen prices return to peak levels are those surrounding San Francisco, where housing prices are notoriously high as Silicon Valley booms. She expects prices across California will return to peak levels, but more slowly — hopefully as incomes increase.
Habits have changed since the recession, too. For example, a 2015 California Association of Realtors survey says homebuyers plan to stay in their homes for 20 years on average, compared to just six years in 2013. Appleton said buyers struggle to secure financing under stricter credit rules. And the foreclosure market has largely dried up, eliminating a swath of cheap homes.
At the same time, the construction industry has been slow to recover — meaning there aren’t enough homes for many potential buyers.
“That’s why the California market is underperforming — it’s a lack of supply,” Appleton said. “We just don’t have enough inventory for sale.”
As prices rise, more first-time and lower-income homebuyers struggle to purchase homes. According to the California Association of Realtors’ annual homebuyers survey, between 42 and 54 percent of buyers during the recession were first-time purchasers. During the bubble years from 2005 to 2008, less than a quarter of buyers were first-timers.
In 2015, first-timers were 40 percent of buyers surveyed in California.
“Limited inventory amidst strong demand continues to push home prices higher,” said Lawrence Yun, chief economist for the National Association of Realtors, in a statement. “Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes.”
Developers are planning several hundred new homes for the desert this year, which Fitzgerald hopes will ease the market. For example, GHA Companies’ Genesis project in Palm Desert has started grading for 166 homes, and the Millennium development will include several hundred multifamily units in the coming years.
In the housing bubble’s development heyday, GHA president Mario Gonzales said, the company had 11 communities underway at once. Today, they’re working on around half as many.
“I think the market is back to normalcy,” Fitzgerald said. “We’re seeing something that’s definitely a lot more sustainable.”
Rosalie Murphy covers real estate and business at The Desert Sun. Reach her at firstname.lastname@example.org or on Twitter @rozmurph.
Article courtesy of The Desert Sun, written by Rosalie Murphy