It almost seems surreal to ask this question in what seems like the mid innings of our current real estate slump and overall economic meltdown.  However many signs appear to indicate, at a minimum, the free fall is over and a bottom may soon follow.  Yet it remains important to draw a distinction between a bottoming market and a rebound in home values.

A recent Los Angeles Times article about the rising median home price in Southern California, quoted southland economist Christopher Thornberg as saying,”… hitting the bottom is different from coming off the bottom,” noting that prices will probably remain low as long as “we still have a massive wave of foreclosures to deal with.” Further supporting his point, Foreclosure Radar recently reported dramatic increases in default notices and trustee sales both in April and May indicating the large wave of distressed homes flooding the California residential real estate market has not yet crested.  Although consumer confidence has shown healthy gains in the past couple of months unemployment for the state has reached 11.5 percent, the highest rate in the past 30 years.

The numbers are worse for Los Angeles.  In an interview with CNN’s Wolf Blitzer, LA Mayor Antonio Villaraigosa acknowledged, “Cities all across the country are on the front lines of the challenges facing us in terms of the economic crisis. Here in the city of L.A., a 12.5 percent unemployment rate, 21,000 people have lost their home over the last two years.”

Yet amid the bad news some very positive signs:

  • Housing Starts - According to the Wall Street Journal this past Tuesday, the government reported a 17 percent jump in housing starts in May.  Attributing a majority of the new starts to multifamily units, single family starts also jumped 7.5 percent.  According to the Journal, analyst Mike Larson suggests, “This adds evidence that the housing market is no longer falling apart.” CEO Ara Hovnanian of Hovnanian Enterprises, Inc. even suggests that some housing markets have corrected “too much” noting that inventory levels have dropped significantly.  Increased starts and decreased inventories of unsold homes may suggest that consumer demand for new homes is strong enough to stabilize pricing.
  • Median Home Prices - The Southern California median home price increased in May for the first time in nearly two years.  The median price indicates the level where half of the homes sold for lower prices and half of the homes sold for higher prices.  Although not an indication of price increases, the measure does indicate a significant improvement in sales of high cost homes.  According to Dataquick, homes priced at $500,000 and above accounted for 17 percent of the home sales in May up from 15 percent in April.  Increased sales activity for homes priced beyond the conforming loan limits indicates lenders have returned to the market, sellers have become more realistic in their pricing and buyers support current price levels.  All good signs.
  • Affordability Levels - Northern California based Foresight Analytics, a real estate consulting firm focusing on forecasting and market analysis, released their 1st quarter Metro Area Home Price Report on June 18 indicating that affordability levels are improving across the country.  Highlighting hard hit markets like Riverside and San Bernardino, the report suggest higher levels of affordability, resulting from lower prices and lower interest rates, are driving bargin shoppers back into a buying mode.  For California, the report indicates strong price gains in the inland areas and central valley coupled with flattened price levels along the coast where prices could increase by the second half of 2009.

Although we haven’t reached the promise-land, trending of the housing market is turning a corner.  Beleaguered markets like California are showing signs of improvement and many markets in Southern California are seeing multiple offers written over and above list prices.  However the end of the housing bust does not suggest a return to unconstrained price appreciation.  Most all experts agree that once prices do stabilize growth will likely occur at a modest clip for some time.

Buy wisely!