- Douglas C. Neff and Gerd-Ulf Krueger
Other than perhaps McDonald's hamburgers, what is selling better today than it did a year ago? Resale homes in California.
Sales in the last six months have gone up 89 percent compared with sales for the same period a year ago, according to the California Association of Realtors. Despite a worsening economy and a media and government afflicted with a bad-news disorder, something strange is happening in the California housing market. There is strong evidence that basic economics is addressing the housing meltdown in a direct manner, which might set the stage for stability and give a hint as to what policies work best.
Resales have been booming in the worst foreclosure markets in the state. Declining prices, severe job losses and pervasive foreclosures are supposed to stifle the market, yet we see record sales and significantly reduced listings in the foreclosure areas. For example, in Stockton, seasonally adjusted resales in December 2008 were up more than 440 percent from September 2007, according to MDA DataQuick, the definitive source for tracking California home sales. That December sales rate was a record for this market. By March, stories continued to abound of strong sales and multiple offers.
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