Is California a Model for the Real Estate Recovery?

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Like most of you here, I look forward to getting a healthy dose of real estate news daily. Whether interest rates are historically low or Fannie Mae is up river without a paddle or Uncle O is considering another tax credit, it makes for great reading while enjoying a cup of joe. Well, a story this week certainly caught my attention.

According to Zip Realty’s Q2 “Home Hunter Report“, California is the place to right now if you are a seller, with homes routinely selling over listing price. My first thought was that I was transported back to 2005, but after turning on the news and seeing Obama handing out more taxpayer money I realized that it’s indeed 2010. Berkeley led the way with homes being listed at $575,095 and selling for $619,574 (107% of list price) and an astounding 91 out of the top 100 ‘hot markets’ being in California. Is this a sign that the California tax credit for new home and first time buyer has been effective in kick-starting the market? Quite possibly. Are REO’s being absorbed by the market rapidly enough to release downward pressure on prices? Sure, it could be argued so, in May 36% of all CA sales were foreclosures. And with Californian’s mortgage defaults at a 3 year low, it could limit the amount of distressed properties on the market soon enough (and the laws of supply and demand shall reign).

So should we account California’s moment in the sun (temporary or permanent, we shall see) to Arnold and his tax credit? If so, should other states follow? Floridians in particular would love to know, having 7 out the 10 ‘coldest’ markets. Your thoughts/comments are most welcomed.

Photo: Kevin Cole

About Author

Alex is a real estate agent specializing in properties in south Maui. For an up-to-date blog on Maui and Hawaii news, events, and real estate trends, visit his blog at or search his site at


  1. Jeff Brown

    Alex — I tend to be pessimistic about CA’s home values in the short run. A dip is in their future if my thinking’s not all wet. Sellin’ for over list prices makes sense when 1/3 or more of the available inventory is bank owned etc. Remember, more and more ‘users’ are bidding against investors, which means emotions are in play. Let’s see what materializes when the next big time wave of actual foreclosures hit CA, as a result of lenders ending their doomed strategy of extend & pretend.

  2. Jeff, good points. This was more a devil’s advocate piece (poorly written at that). With a huge shadow inventory looming and rampant unemployment, I don’t expect CA to maintain increasing (or even stable) prices. But I certainly wasn’t expecting these kind of numbers from CA, short-lived as they may be, so i was hoping for comments (from you in particular). Thanks for commenting!

  3. Jeff, are they still operating under their state’s tax credit? Until they have been weened off that credit, I don’t think we can really know what is happening in that market. Similar to the cash for clunkers model, you can’t really see the effect until you can see it in your rearview mirror.

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