California Resales May Rise, But ...

Existing home sales in California are expected to increase by 12% this year, according to the state's Realtor group. But the jump is largely attributable to the sale of distressed properties at heavily marked down prices. Nearly one in five of the 395,600 sales projected for 2008 will be because the property was in default and the houses were sold either via a short sale or at foreclosure, the California Association of Realtors said in its annual state of the housing market report. Also, when all is said and done, almost one in four sales will result in a loss for the seller, said CAR chief economist Leslie Appleton-Young. "Price declines eliminated equity gains," she said. The number of sellers who sold their home with a loss almost doubled from 11.9% in 2007 to a record-setting 22.2% in 2008, well above 1.9% in 2006, and almost triple the long-term average of 7.7%. However, long-term owners who have not refinanced or removed equity from their homes were less likely to experience a loss. Only 3% of sellers who owned their homes for more than five years had a net cash loss from their home sale, while 47% who owned their homes for less than three years had a net cash loss. The median price of existing homes sold this year declined 17.5% to $440,000. That's the largest drop in the median since the inception of the study, surpassing the record decline of 10.2% set in 1995. Ms. Appleton-Young said the market will continue to experience falling prices into 2009.