North Bay Real Estate Blog

By Kathleen M. Howley and Dan Levy

May 27 (Bloomberg) -- Housing demand in California, where one out of every eight U.S. residents lives, is reviving as bargain hunters buy foreclosed properties, reversing a two-year slide in home sales.

Sales in the state increased 2.5 percent in April, following 30 consecutive declines, the California Association of Realtors said in a May 23 report. The median home price tumbled 32 percent in April from a year earlier to $403,870, the biggest drop in at least three decades, dragged down by sales of foreclosed properties, the Los Angeles-based trade group said.

About 30,000 foreclosed homes have been auctioned in California so far this year, the most of any U.S. state, according to RealtyTrac Inc. in Irvine, California. Banks holding repossessed properties are so eager to unload them they'll give buyers discounts of as much as 40 percent, said Celia Chen, an economist at Moody's Economy.com in West Chester, Pennsylvania.

``Lower prices will certainly entice buyers back into the market, especially in a state like California where the median home price is so high it's made it very difficult for people to afford a home,'' Chen said.

Foreclosure auctions are removing inventory and may lead to a faster housing market recovery as prices drop, Karl Case, co- founder of the S&P/Case-Shiller home-price index, said today. The measure of 20 U.S. metropolitan areas fell in March from a year earlier by 14.4 percent, the most on record.

`Prices Adjust' Rapidly

``Banks don't wait around,'' Case said in an interview today. ``They put it on the market and get rid of it. That means prices adjust more rapidly.''

Sales jumped 20 percent or more in April in Las Vegas, Fort Myers, Florida, and Riverside and Sacramento, California, areas that had ``strong and sudden price drops,'' said Walt Molony, spokesman for the National Association of Realtors. Those cities also ranked among the top 10 U.S. metro areas with the highest foreclosure rates, RealtyTrac said.

The most expensive U.S. metropolitan market for single-family homes in the first quarter was San Jose, with a median price of $780,000, the National Association of Realtors said in a May 13 report. The national median home price was $196,300 in the same period, the Chicago-based trade group said.

High-Price Sales

San Francisco had the second-most expensive home sales, with a median of $701,700, followed by Honolulu, at $620,000, and the Anaheim and Santa Ana, California, areas at $597,900, according to the Realtors' report. The metropolitan area surrounding New York was fifth, with a median single-family home price of $491,900.

The biggest U.S. state also led the nation in home-price drops. Sacramento saw the biggest price decrease in the nation during the first quarter with a loss of 29 percent, followed by the Riverside and San Bernardino areas, down 28 percent, the Realtors said.

San Diego's median home price dropped 23 percent in the first quarter, the fourth-biggest U.S. price decline, according to the Realtors' report. Los Angeles was No. 6, down 21 percent, the Realtors' study said.

To contact the reporters on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net; Dan Levy in San Francisco at dlevy13@bloomberg.net