California home prices and sales rose in September, Realtors say

California home prices and sales edged higher in September from the previous month as shoppers took advantage of low interest rates and a federal tax credit for first-time homebuyers, the state's Realtors group said today.

The California Assn. of Realtors reported that the statewide median price of an existing single-family home increased 1.1% in September compared with August and declined 7.3% compared with a year earlier. September home sales increased 0.6% from August and 2.1% from September 2008, the group said.

The median home price increase for September marked the seventh consecutive such rise, said the association’s chief economist, Leslie Appleton-Young. Appleton-Young attributed the increase in part to this year's $8,000 federal tax credit for first-time buyers.

The credit applies to home sales that close through Nov. 30 and is part of the $787-billion federal stimulus package enacted in February.

The housing industry has been pushing to extend or expand the credit. But a deficit-wary White House has been less eager to do so given the estimated $1-billion monthly cost.

Last week, Treasury Inspector General J. Russell George threw the effectiveness of the program into further question, testifying before Congress that the program had attracted as many as 90,000 ineligible claimants -- including a 4-year-old child. In all, tax credit claims totaling more than $600 million are suspicious, tax officials told Congress.

Some economists that follow the housing market question whether this summer’s apparent recovery is genuine.

Christopher Thornberg, principal of Los Angeles-based Beacon Economics, said the increase in September sales reflected the end of a heady summer fueled by the tax credit and historically low interest rates enacted by the Federal Reserve last year to combat the financial crisis.

“We know that over the summer, housing got a kick in the rear end because of artificially low interest rates, an artificial surge in demand because of the first-time buyer credit, and an artificial blockage of foreclosed units because of all of the Hope for Homeowner plans,” Thornberg said. “What all of these things has done is create a temporary bottom in the housing market -- with the key word being 'temporary.'”

The association said the median price of an existing, single-family detached home in California during September was $296,090, compared with the $292,960 median in August. In September 2008, the median was $319,310.

The group said sales of existing single-family homes in California totaled 530,520 in September at a seasonally adjusted annualized rate. That compares with the revised 519,530 sales pace recorded in September 2008.

-- Alejandro Lazo

Comments

[Rich]

If CAR uses the same methodology as NAR, then Justin Fox at Time says they probably have it wrong:

"The NAR's data are skewed by what kind of houses are selling, so if the low end of the market is more active than the high end, the median sales price goes down even if the underlying price trend is upward. Case-Shiller corrects this problem by comparing sales prices to previous sales prices for the same homes, then using statistical adjustments to come up with a monthly index. So if Case-Shiller says house prices were up in August and the NAR says they were down, believe Case-Shiller."

http://curiouscapitalist.blogs.time.com/2009/10/27/are-housing-prices-about-to-start-tumbling-again/

[Drew]

Based on the Case-Shiller graph attached to the article, the declines have caught up to the rate of inflation between 2000 and present. In other words, the current values are what they would have been based solely on a 4% inflation rate over that period.