California Housing Market Shows Pockets of Recovery

Prices Have Dropped Far Enough to Lure Buyers in a Trend Also Showing Up in Other Parts of the Country JIM CARLTON

Northern California, a big factor is first-time buyers like Denise and Steve Petrosky , who are newly optimistic about the market and can afford a home the first time. The Petroskye in February paid $374,900 for a three bedroom home in Morgan Hill, just south of San Jose that last sold in 2006 for $610,000

The couple were too leery to enter the market last year while prices were still heading down, said Mrs. Petrosky, 43 year old, an office manager, but felt prices had bottomed early this year. “Basically, we had set a budget what we could afford, which was below $400,000. ”Mrs. Petrosky said. “When the prices came down below that, we bought, because we could afford to.”

Home prices are still falling in many California markets. But the state’s average existing single-family home price has been inching up for two months, with the median sales price climbing to $236,700., in April from $217,590., in February. Much of that increase is thanks to a growing number pocket of recovery in the housing market.

Northern California median price has risen for four straight months in Santa Clara and for three months in Contra Costa County, according to estimates by MDA Dataquick Information Services, a market-research firm in La Jolla, Calif. In Southern California, the medium price has risen or stayed the same three months in a row in Los Angeles County

These price increases might not presage a lasting resurgence in California’s housing market. The state’s high unemployment rate 11.5 in May could lead to more foreclosed homes that banks could then dump on the market. California’s median home price remains down 37% from a year ago.

More broadly, Ms Selman and other housing economist cautioned again meeting the signs of greater sales activity as meaning the housing burst was primarily over. Interest rates on 30 year , fixed rate prime mortgages have risen well above 5% in recent weeks and could rise further if inflation fears push up _. A nation tax credit for first-time home buyers ends Nov 30, 2009 removing incentive.

The overall economy in California hasn’t gotten its footing,..” said Katherine Perez , executive director of the Los Angeles office of the Urban Land Institute, an industry think tank. “So it’s difficult for me to say we have hit bottom. “Still, she said, “there are some pretty clear signals there is some leveling.

Look at Santa Clara County shows some of the dynamics behind the leveling. Home to Silicon Valley in the north, the county of 1.8 million residents went into the slump with the rest of the state, with county resident’s unemployment shooting above 10% this year from 5% in 2007. The median of a% previously owned home fell 48% to $420,000 in January from a price of $805,00 in August 2007 according to Data quick.
Late last year, the county’s sales still lagged behind those in inland areas like Riverside and San Bernardino counties, where sales volumes were us 251% November 2008 over November 2007. According to the California Association of Realtors. Santa Clara County’s November sales were up only ___% The inland sales were booming, in part, because prices fell further ___

__the lights seemed to turn back on in Santa Clara County home sales. Sales were up 40% in December, and kept rising into 2009. The median __, which had slid steadily since June 2008, stopped falling in February. A number of pending sales in the county has nearly doubled to 3,882 as of___week from 2096 a year ago, according to the Santa Clara County Association of Realtors.

The biggest catalyst, local agents say, has been affordability. By April, the number of Santa Clara county residents who could afford a home in the county, based on household income, had jumped to 50% from 18% two years ago, said Quincy Virgilio, president of the Santa Clara County Association of Realtors.

In other areas of California, the hottest part of the Santa Clara market has been at the lower end- in this area , that ‘s under $600,000. For example, prices rose 15.6% to % $540,000 to $467,000 in January according to Dataquick.

By contrast, prices in some higher-income neighborhoods in Santa Clara county are still falling-such as in parts of tonier towns like Cupertino and Los Gatos. Agents said that reflects borrowers’ problems getting into jumbo mortgages to make those purchases. Home prices are still falling in parts of San Francisco and San Diego County for the same reason, they said

James R. Hagerty contributed to this article. Wall St Journal,