Posted by Joseph Y. Calhoun, III

In the same week the Obama administration released its housing recovery plan, there are signs that the market is starting to heal itself. Sales figures from some areas are showing significant sales increases over 2008 levels. From the SF Chronicle:

The relentless surge of foreclosures spurred gangbuster sales and bargain prices for Bay Area homes in January, according to a real estate report released Thursday.

A total of 3,918 existing single-family homes changed hands in the nine-county region last month, a big jump from 2,312 sales in January 2008, according to research firm MDA DataQuick of San Diego.

For the first time, more than half - 54.2 percent - of all homes sold in the nine-county region were bank-owned foreclosures. Their fire-sale prices drove the median sales price for existing homes down to $304,000, a nine-year low.

“Despite virtually no signs of home prices stabilizing anywhere, plenty of people have decided it is time to buy, simply because of the increased affordability,” said Andrew LePage, a DataQuick analyst. “Through all this bleak news on the economy and jobs and home prices still eroding, plenty of people who sat out the frenzied stages of the market are deciding it may not pay to wait now.”

One doesn’t need an economics degree to understand this. It’s simple supply/demand Econ 101. Prices fall and demand rises. In fact, there is some indication that the prices have actually fallen too far:

Many real estate agents describe bidding wars for distressed properties that rival those of the boom days - albeit at significantly lower price points.

“My strategy for short sales is to price about 10 percent below market,” said Cindi Hagley, a Realtor with Windermere Welcome Home in San Ramon, discussing homes being sold for less than the owner owes on the mortgage. “They aren’t always easy to sell because of the time to turn around but I’m getting offers that number in the teens; I had 22 offers on one listing.”

Peter Harris, a Realtor with Bradley Real Estate in Novato, described the buyer competition over a four-bedroom, two-bathroom, bank-owned home in Rohnert Park last week.

“It came on at $219,000; it was well priced, which gets a lot of offers,” he said. “When we wrote our offer, there were already 11 offers, then they wound up with 20, just in the first week. The Realtor said the bank wants everyone to come back with their highest and best offer. We came back with $230,000, which was well over asking and got beat out - we don’t know what for, since it’s still in contract.”

Here’s another report for Southern California:

La Jolla, CA—Southern California home sales climbed above year-ago levels for the seventh consecutive month in January as bargain-hungry buyers flocked to inland areas pounded by foreclosures and deep discounts. Increased affordability in some of those neighborhoods spurred record or near-record resale activity, while many pricier coastal towns again posted some of their slowest sales in two decades.

Foreclosures continued to play a leading role in the market, accounting for nearly 60 percent of all homes that resold, according to San Diego-based MDA DataQuick, a real estate information service. Sales of newly built homes were the lowest for a January in at least 21 years - partially a reflection of how difficult it is for builders to compete with discounted foreclosures in the inland growth areas.

A total of 15,227 new and resale houses and condos closed escrow in the six-county Southland last month. That was down 23.6 percent from 19,926 in December but up 52.5 percent from 9,983 in January 2008. A decline of 20 to 30 percent between December and January is normal.

Last month’s sales were the highest for that month since January 2006, when 21,895 sold, and were 16 percent below the average January sales total since 1988, when DataQuick’s statistics begin.

Sales of existing single-family houses reached record levels for a January in inland communities such as Chula Vista and Lemon Grove in San Diego County; Fontana and Victorville in San Bernardino County; Perris and Temecula in Riverside County; and Palmdale in Los Angeles County. Such areas have seen prices drop, and therefore affordability rise, more than most Southland communities.

Inventories in CA are now down to about 6 months supply based on the recent sales pace. That is a fairly normal level of inventory. Is it possible that the administration is rolling out a housing recovery plan just as the market is bottoming? Based on past instances of government intervention, that would not be a surprise.

This also brings into question the complaint that people can’t get financing. These sales total almost $1.5 billion and everyone did not pay cash. It is probably safe to assume that at least $1 billion of this total was financed. While a good portion of the lending is no doubt government subsidized (through Fannie/Freddie/HUD) there is obviously credit available for qualified buyers.