California Provides Interesting Case Study for Today’s Real Estate Situation

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California Provides Interesting Case Study for Today's Real Estate Situation

If you were to create a list of the top five states hit hardest by the real estate market collapse, California would be on that list.

But according to a survey of California-based Realtors, there are a lot of positive trends going on in the Golden State that provide a case study for real estate at the national level.

Positive Equity Sales Spike Dramatically

One big development in 2013: the percentage of homes with positive equity – meaning, the difference between the home’s fair market value and the remaining balance on the loan is positive – rose significantly.

In 2009, for example, positive home equity sales only made up 30% of all home sales – a dismal number that was a clear indicator of how dire the situation was for homeowners, many of whom were trying to just get rid of a home whose value had dropped like a rock.

In 2013, however, positive equity sales rose to 85%, a much healthier number for a market.

Rising home prices have helped turn this statistic around. The higher home prices go, the more valuable a homeowner’s equity becomes. Rising home prices have also helped over two million underwater homeowners regain positive equity.

REOs and Distressed Properties are Fewer

Another development is the relative scarcity of distressed properties and REO homes.

In 2009, a staggering 60% of all real estate closings involved bank-owned homes.

California distressed home

Now, the percentage of total home sales that are REO properties is only 5%.

According to one Realtor, distressed properties in California are actually “slim pickings” – and this is from a state that has consistently been at or near the top of the list when it comes to foreclosures since the crisis began.

Rising prices are also to credit for this trend in part, but the prevalence of loan modification assistance in the state, coupled with a strong investment presence from domestic and foreign buyers, has generated support for beleaguered homeowners to avoid foreclosure altogether.

Plus, distressed properties in the state have largely left the market, although some areas are still heavy with California foreclosures and short sale opportunities.

It’s not all roses with California, of course; Realtors worry that the government shutdown and the upcoming debt crisis debate could further dampen recovery efforts, a theme that is being heard all over the country.

For now, though, California is a good example of a state that has emerged from the depths of the real estate market crash to something more closely resembling normalcy.

Image source: spirit of america / Shutterstock.com

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