The language comes from recovery groups, but today I’m applying it to real estate. From a recent CAR presentation about the state of the market, past, present and future comes a slide titled “Hitting Bottom: Sales 2007, Prices 2009”. The slide looks at 40 years of California real estate market data, charting both the number of sales of existing detached homes and the median price at which the homes sold. It’s a fairly high level look at California real estate trends, and while it can’t speak to what has happened in any particular local market, I still think it is interesting for some historical perspective in the California real estate market.
According to the California Association of Realtors data, the number of sales hit bottom in California in 2007, with a 44% decrease from the number of units sold in peak year 2005. The median price hit bottom two years later (insert joke about sellers in denial here) in 2009.
If you look at other contractions, you see the biggest decrease in volume actuallyÂ occurredÂ between 1978 and 1982, when there was a 61%Â decreaseÂ in sales of existing detached single family homes. Â However, even during that time from the median price was actually increasing, unlike theÂ plummetÂ in median price that happened between 2007 and 2009.
The other big slump in the volume of single family homes happened between 1988 and 1992, when volume was down 25% and median prices were essentially flat.
So has the real estate market made amends for its addictive behavior? Has it finally recognized a higher power (interest rates? mortgage underwriting standards? national debt?)
Or are we just in court-ordered rehab for the equivalent of a 30 day dry-out period, with California real estate soon to return to it’s binging ways, like Lindsay Lohan?
Or should I just hang up the metaphor and get back to my day job?