Firm: California home sales drop 22 percent as tax credit expires

Firm: Calif. home sales drop 22 percent in July

LOS ANGELES — Home sales in California showed their largest year-over-year drop last month in more than two years, as the market attempted to weather an increasingly unsteady recovery without the help of federal tax credits, a tracking firm reported Thursday.

San Diego-based MDA DataQuick said sales declined 21.9 percent to 35,202 homes last month from 45,079 homes in July 2009 and sank 19.9 percent from 43,964 homes in June.

Last month was the slowest July since 2007, when 35,185 homes were sold, the firm said. July’s year-over-year drop also was the steepest since March 2008, when the newly frozen credit market prompted a sales decline of 38.3 percent.

Stuart Gabriel, who directs the Richard S. Ziman Center for Real Estate at the University of California, Los Angeles, said the declines are symptomatic of the weakening economic recovery, which is making potential buyers reluctant to enter the market while they’re unsure of their financial futures.

“There is very substantial uncertainty at this moment with respect to the momentum of the recovery,” he said. “The housing market will improve when the job market improves and the overall economy improves.”

DataQuick president John Walsh, however, pinned most of the blame on the expiration of the federal homebuyer tax credits that had fueled previous months’ sales.

“We think they were the main reason the decline was so sharp,” Walsh said. “As the boost from the credits waned, low mortgage rates just weren’t enough to outweigh the weak economic recovery and low consumer confidence.”

The median home price in the state declined 0.7 percent to $268,000 last month from $270,000 in June, its second consecutive month-to-month drop, although the median price last month was up 7.2 percent from $250,000 in July 2009.

Walsh said further price deterioration could be coming, as potential buyers wait to see whether the drop in sales translates into greater discounts.

Buyers “will take their time to assess market conditions, searching for signs of renewed price cuts,” he said. “Depending on the economy and other factors, that might be what some of them find.”

Gabriel, however, said demand from investors and other buyers drawn to the market by low interest rates will keep prices from declining much.

“For anyone who has a stable job, a stable income and a reason to stay in a home for three or four years, now is really a spectacular time to buy,” he said.

But he cautioned that the broader economic malaise would keep prices from rebounding strongly any time in the near future.

“We don’t expect prices to either march higher at a significant rate, nor do we expect to see significant deterioration in pricing going forward,” he said.

In a nine-county region of Northern California, sales declined 22.8 percent to 6,773 in July from a year earlier. In the six-county region of Southern California, sales dropped 21.4 percent to 18,946 from July 2009.

The median home price in Northern California crept up 1.8 percent to $402,000 last month from $395,000 in July 2009. In Southern California, the median price increased 10.1 percent to $295,000, up from $268,000 in the year-ago period.

Foreclosures comprised some 35.6 percent of the state’s resales last month, up from 34.1 percent in June but down from 43.5 percent a year ago.