NEW YORK (Reuters) - The tide is turning in some parts of the long suffering U.S. housing market, with several regions, such as hard hit California, showing signs of life.
Subprime lending to less creditworthy borrowers was widespread in California and the state had the second-highest rate of mortgage foreclosure filings in the United States in April 2008 — one in every 78 households.
Those foreclosed properties present buyers with huge bargains and home and condo sales were up 43 percent in February from a year earlier, according to MDA Dataquick. Of the existing homes sold, 58.4 percent were foreclosed properties.
Even in the U.S. Northeast, a part of the country with fewer foreclosures and where the fall in house prices was less extreme, existing-home sales led all regions, rising 15.6 percent in February, according to the National Association of Realtors.
“Based on the top line housing numbers for February, it does seem like a spring thaw is coming early to the housing market,” said Celia Chen, senior director of housing economics at Moody’s Economy.com in West Chester, Pennsylvania.
The signs of life in the California property market could portend a national recovery.
“California’s share of the U.S. housing market is large,” Chen said.
“Existing-home sales in California have run between 9-12 percent of national sales over the last decade, so the performance of the state’s housing market can have a large impact on the national sales and price numbers,” she said.
Sharply lower prices, record low mortgages interest rates, and the government’s $8,000 tax credit for first-time home buyers have been the key to increasing home sales in California.
The median price of an existing single-family home in the state fell 40.8 percent to $247,590, the California Association of Realtors said on Wednesday and sales of existing single-family homes rose 83 percent to an annualized 620,410 units in February from a year ago
The rise in new homes sales in states plagued by foreclosures, such as California and Arizona, contributed to the nationwide rise in new home sales of 4.7 percent in February in Commerce Department data.
The stabilization of the housing market remains a prerequisite for normalization of financial markets and the U.S. economy, according to Michelle Meyer, an economist at Barclays Capital in New York.
The decline in interest rates on mortgages, which fell to a record low again this week, and more affordable housing is a move in the right direction, she said.
Rising activity in Northeast property markets, which have not been weighed down by foreclosures as much as other regions of the country, also indicates buyers are ready to come back after being sidelined, Meyer said.
“The Northeast is not the biggest piece of the housing market, but nevertheless strength in this region points to a greater equilibrium between supply and demand,” according to Adam York, economist at Wachovia in Charlotte, North Carolina.
There was less new building in the Northeast region and recent gains could be attributed to seasonal distortions, he added.
“It does show that if prices fall enough, even against the force of a major economic downturn, existing sales can pick up,” said Eric Belsky, executive director at Harvard University’s Joint Center for Housing Studies
Cheap deals on foreclosed homes have not helped the Northeast as much as interest rates falling to record lows.
Interest rates on 30-year fixed-rate mortgages averaged 4.85 percent for the week ending March 26. The rate broke the previous record low of 4.96 percent set 10 weeks earlier, according to Freddie Mac.
The 30-year fixed-rate mortgage was the lowest since Freddie Mac started surveying them in 1971.
Despite all the “green shoots”, an anemic outlook prevails.
“Once stabilization does occur, we expect a long period of relatively flat activity and not a robust rebound,” said Goldman Sachs in a recent research note.
Additional Reporting by Lucia Mutikani in Washington and Jim Christie in San Francisco