Despite Rising Home Sales, Many Doubt Recovery Is Close At Hand
- The Bonez

Despite growing home sales in California, many experts fall far short of optimistic that the recent upturn in home sales across the state could be the beginning of a turnaround in the broader market. In January, sales were more than double those of January 2008. February sales were nearly 85% higher than the previous year. However, while total sales have increased dramatically, the median sales price has dropped across the state.

January's median sales price was more than 40% lower than last year, about the same as in February. The median sales price is the midpoint of the highest price homes and the lowest. An equal number of homes are valued under the median as are valued higher. While very useful in some respects, the median can sometimes be misleading. For example, if there are five sales valued at 100, 80, 60, 40, and 20, the median price would be sixty. Add two sales of 30 and 10 and the median drops to forty. In the second example, the median drops, though the sales at the high end are still the same. This is indicative of the trend in California. While more homes are selling, many are at low priced homes leading to the drop in the median. This is not necessarily a bad thing.

Many of the buyers are first time homeowners as well as investors. For many reasons, this is a positive trend. The nature of most of these sales, however, is not a very good thing. Across California, more than 50 percent of homes being sold are from distressed properties, or homes owned by banks because they have been foreclosed on. These type of sales do not always effect the market in the same way as sales of lower-range-priced homes. Normally, they are not indicative of a homeowner trading up. A 2 bedroom house sells, but doesn't result in the sale of a larger home. It only represents a bank lowering its inventory of distressed properties it owns and doesn't want. A recovery in the housing market will have occurred when homes are selling at all price ranges; even if those price ranges are lower. While it is a good sign that many first time homeowners are entering the market, there should be assistance designed to encourage homeowners to move up to mid- and upper priced homes.

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