Carpe Diem

California real estate market is hot, hot, hot!

For those of you who haven’t yet been convinced that the US housing market is in a robust recovery, you should check out what’s happening in California, where the real estate market is hot, hot, hot!

1. California home sales increased by 5.4% in December from a year earlier, while the median sales price increased by a whopping 21.5% to the highest level since August 2008. Foreclosure sales accounted for 15.5% of the California properties sold in December, which was the lowest foreclosure share of home sales in any month since October 2007, more than five years ago.

2. The median price paid for a home in the nine-county San Francisco Bay Area increased by an eye-popping 32% in December from a year earlier to $442,750, the highest median home price in the area since August 2008 when it was $447,000. The 32% increase in the Bay Area’s December median home price was the highest annual gain in more than 25 years, according to DataQuick, whose monthly housing data starts in 1988.

5 thoughts on “California real estate market is hot, hot, hot!

  1. I recently read Sowell’s book on the boom and bust:

    According to Sowell, open space and zoning laws, the CRA, Fannie and Freddie, and more, all contributed to the boom/bust. From the Reason article, “[Sowell] notes, the immense local variability in housing prices and failed loans reveals that the government mistook a set of local problems for a national one, and then imposed a single troublesome national solution.”

    My question for Carpe Diem readers: are CA housing prices just rebounding from too-low lows, or is this another bubble?

  2. the bay area is currently red hot. no question.

    but worth keeping in mind, that same article attributed “more than half” the gains in median price to mix shift.

    it’s important to keep that in mind when using median price figures. the price of an individual home in the bay area is up to be sure, but median figures can show a dramatic rise even in a flat market if the mix shifts toward the high end.


    the bay area prices are largely driven by the tech ipo cycle. there is a 90-180 day lag as shares need to come unlocked etc, but a lot of big social networking site came public recently and created scads of young new millionaires that are out house hunting into a very limited supply, especially in the better areas.

    i moved to the bay area in 1994 and lived in sf until the end of 2010. from about 1997 on, the real estate market there has been described as a “bubble”.

    it got hurt after 2000, but recovered quickly and (at least in sf proper) shrugged off 2008 in maybe a year or 18 months. it’s just a very expensive place to live and the demand during boom times is enormous.

    in sf itself, pretty much every loan is s super jumbo as well so you do not get the excesses of GSE and FHA driven lending.

    i would not be anxious to pay the current prices, but i do not think it has hit bubble status yet either and i am not going to sell either.

    ironically, a lot of transactions will help the CA fiscal situation, at least at the local and county level. prop 13 limits/eliminates appreciation on homes for tax purposes. if you bought in 1980, you are paying virtually no property tax. but if the house trades, that resets.

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