Foreclosed homes taken back by lenders and distressed short sales accounted for nearly half of all residential home sales in California in 2009, according to a market report released this week by the California Association of Realtors (C.A.R.). In 2008, such sales made up 38 percent of annual transactions.
As one of the hardest-hit states by the housing downturn, the Golden State is littered with bank-owned properties and homes facing foreclosure, but the lower prices and increasing buyer appetite for these deals are helping to reduce some of California’s distressed inventory.
The median price of distressed properties declined nearly one quarter to $250,000 in 2009, compared with $330,000 in 2008, C.A.R. reported. Meanwhile, the median price of non-distressed properties decreased only 10.4 percent to $485,000 compared with $541,000 in 2008.
Although one-third of sellers sold their homes for a loss last year – the highest level on record since C.A.R. started tracking net cash losses in 1989 – the lower home prices lured investors. According to the state Realtors association, more than 70 percent of properties purchased by investors were either short sales or REO/foreclosures. The typical investment property had a median price of $232,750.
Lower home prices and a large supply of distressed properties, coupled with federal tax breaks, also encouraged first-time buyers to take the plunge into
homeownership. The percent of first-time buyers increased dramatically to 47 percent in 2009, up from 35.9 percent in 2008, according to the report.
“It is clear that the federal tax credit for homebuyers worked well in 2009 and is continuing to drive home sales,” said C.A.R. President Steve Goddard. “The homebuyers’ tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the economy.”
According to a survey conducted by C.A.R. on the effectiveness of the federal tax credit, nearly 40 percent of homebuyers in the state said they would not have purchased a home if the tax credit was not offered.
C.A.R. also noted that the large number of distressed properties led to more than half of all first-time buyers purchasing an REO/foreclosure or short sale property.
According to C.A.R.’s analysis, California’s median home price hit bottom in February 2009 at $245,170. Since then, the median home price has increased steadily in month-to-month comparisons, but remained below 2008 levels throughout 2009. The annual median price is projected to increase to $280,000 in 2010 from $271,000 in 2009, the association said.
Homes priced $500,000 or less dominated the sales mix throughout 2008 and 2009, but C.A.R. says sales of high-end homes started picking up in late 2009, with the number of closings for homes priced $500,000 or higher rising 3 percent, and sales of homes priced $1 million or more experiencing their first year-to-year increase since July 2007.
A separate study by a local newspaper shows that a growing number of Californians are turning to the courts to fight the foreclosure process and prevent their homes from becoming REOs. According to numbers complied by the San Jose Mercury News, the number of foreclosure lawsuits filed in federal court in California has ballooned from just 29 cases statewide in 2005 to nearly 1,400 in 2009.
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