Glimmer of Hope for Southern California Home Market

I read an interesting article today in the Wall Street Journal (subscription required for some content) titled the same as this post. The main point of the article, for those without access, is that for the first time in 10 months, the median home price in southern California (as measured by MDA Dataquick) did not go down last month. Instead it stayed steady at $250,000, but still down 39% year over year. The article speculates about the market bottoming.

Personally, from everything I have seen, I think the low end of the market has bottomed or is extremely close here in San Diego. In some areas of the county, condo and townhome prices are down over 60% and are now selling for in the area of 6 times annual rent with Cap Rates north of 10%. Sales are up 56% year over year and it is largely these lower end Bank REO properties that are selling, mainly to first time home buyers and investors.

I think the higher end of the market still has some pain ahead. Most people in this segment were able to ride out the earlier market declines and simply pulled their homes off the market rather than cut their asking prices to reasonable levels. As the recession progresses I think you will see more forclosures and forced sales of mid to high end homes.