DavisRealEstateGuide.com

Dec 2008

2008 Housing Market Wrap-Up
By Oscar Wei, Senior Research Analyst

Statewide sales continued to be strong in December, as deeply-discounted distressed sales remained at high levels in many parts of the state. After dropping slightly in November, home sales bounced back in December and rose to the second-highest seasonally adjusted and annualized monthly sales level for all 2008. With sales of 544,580 homes, transactions improved by 5.9 percent over the (revised) November 2008 figure of 514,000 homes, while increasing 84.9 percent over (revised) sales of 294,520 homes a year ago. Sales have exceeded 500,000 for four consecutive months.

Annual sales of existing homes for 2008 increased 26.7 percent from a revised 2007 figure of 346,940 to 439,740 in 2008. Large year-to-year percentage gains in sales will likely continue but at a diminishing rate in the next few months, as current sales are compared against extremely low numbers that prevailed during the early months of the Credit Crunch in the late 2007 and early 2008.

Meanwhile, the statewide median price declined 2.0 percent from $286,850 a month earlier to $281,100, and dropped 41.5 percent from the prior year median of $480,820.  The significant decline in price was attributed largely to the dramatic change in the mix of sales since late 2007 and the increase in the share of distressed sales. Prior to the beginning of the Credit Crunch in August 2007, the sub $500K price range accounted for 43 percent of sales, the middle segment ($500K to $1 Million) made up about 42 percent, and the over $1 million segment captured 15 percent of the market. As of December 2008, the shares had shifted to 82 percent, 14 percent, and 4 percent, respectively.

For the year 2008, the annual median price fell 38.1 percent from $560,270 in 2007 to $346,750. With the economy deteriorating and the financial system struggling to stay above the water, distressed properties with deeply-discounted price will continue to affect the market. Home prices may not show clear signs of stability until the mid of 2009.

Showing more positive on the supply side of the housing market, the unsold inventory index was 5.6 months in December, down from 6.9 months a month earlier and was less than half of the inventory level of 13.4 month a year ago. The index has been below the long run average of 7 months since July 2008, and the current inventory level of 5.6 months was the lowest since March 2006.

For the year 2008, the index averaged 8.9 months, as compared to 11.2 months in 2007. The decrease in the index was due primarily to the increase in sales in the second half of the year. The average year-to-year percent change of the monthly sales for the second half of 2008 was 80.1 percent, as compared to 7.4 percent in the first half of the year. As a result, the inventory level averaged 6.4 months from July 2008 to December 2008, whereas the average from Jan 2008 to June 2008 was 11.4 months.

To learn more about our Trends Newsletter, please contact the Research & Economics Department at research@car.org or (213) 739-8352.