The median price in the state of California was $271, 320 in February, down 2.8 percent month-to-month and down 2.5 percent year-to-year. In the last four years, median price in the first few months of the year has declined more sharply than the long-run trend going back to the late 1970s. So what is going on here?
Bank behavior is one reason…
Since 1979, the January-to-February change in the median price has averaged a drop of 0.1 percent. However, over the last four years, with an average December-to-January decline of 9.6 percent, followed by an average January-to-February decline of 2.3 percent.
This recent phenomenon does not seem to be a fluke. Instead, it is more likely a result of bank behavior. In looking at distressed sales statistics from C.A.R., there is an increased concentration in Bank Owned or REO sales in the final months of each year that carry over into the first two months of the next year. This spike in distressed properties in the beginning months of the year could drive the price downward during those time periods.
The seasonal spike in distressed property sales coincides with a recurring annual pattern in high-end homes around the holidays through the first few months of the year.
…Discretionary sellers is another
Over that time period, both the number and percentage of high-end home sales ($1 million and higher) typically decline each year. Together with the seasonal spike in distressed properties, the typical drop in the median price during the first few months of the year has become amplified.
In both 2009 and 2010, the steep month-to-month declines in the median price in January and February were offset as the market moved into the peak months beginning in March and running through the summer so that by mid-year the median had returned to the late-season levels of the previous year. However, the market and median price were boosted in 2009 and the first half of 2010 by Federal tax credits which have since expired. In 2011, the market must move forward on its own as economic conditions improve.
Give me a call to find out what your home is currently worth! Reach me by cell at 714.914.9060 or Renee@prucdm.com.
This information is completely from the California Association of Realtors’ Market Snapshot report, viewable here.
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