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92 STATE OF AFFAIRS: WEST » IN THE NEWS California Economy Makes Progress e Wells Fargo Economics Group released its California Economic Outlook for February, 2014. e report noted that while recovery has been slow in the past, "[T]he state has methodically made progress work- ing through a number of major impediments, most notably the overhang of foreclosures and distressed homes left over from the housing bust." e outlook cited a California Association of Realtors (CAR) report that shows sales of existing homes fell 13.8 percent in January from a year earlier, largely from a decline of foreclosure inventory. "e median price of an existing home rose 22.1 percent in January to $410,990," the report noted. Homes are taking a little bit longer to sell than a year ago—44.3 days on the market. "ese trends, however, reflect more of a normalization of the housing market," the group said. In January, California home prices increased 20.3 percent from a year ago, ac- cording to a report from CoreLogic. e sluggishness of the for-sale market has created a new and growing segment of rental homes, according to the outlook. e difficulty of qualifying for a mortgage and declining affordability of new homes are driving many people to rent in metropolitan areas closer to where they work. Consequently, the Wells Fargo report stated, "Residential construction has also been slow to recover. Activity has improved, but much of the action has been in apart- ments, which helped pull multifamily permits up 24.9 percent over the past year on a 12-month moving average basis." Vacancy rates are just 3.1 percent in the Bay Area. e Bay Area, particularly San Francisco, continues to see home prices well above their prerecession peak. Prices are up 19.1 percent from a year ago, and home inventories are falling. However, rising prices have put off some buyers. "Home sales declined in the Bay area, with San Francisco and Napa posting the largest losses," the outlook said. Michael Wolf, an economist at Wells Fargo, said many of the trends in California, and specifically the San Francisco area, could transfer to the nation. "I think a number of trends we are seeing in California are also evident throughout the nation. One is the strength of high-tech in- dustries in San Francisco and San Jose. Other areas with a large concentration of high- tech employers are also leaders of economic growth in their respective states (e.g. Austin, Raleigh and Seattle)," Wolf said in an email to DS News. Wolf continued, "Existing home sales have been relatively weak recently, though the drop seems to be particularly severe in Cali- fornia. Nationwide, some of this may be able to be blamed on the weather, but in general the housing market recovery was bound to moderate from some of the breakneck speeds we were seeing earlier in the recovery." Unemployment figures play a part in California's recent housing climate. Unem- ployment fell 1.4 percentage points to 8.3 percent for the end of the year. e report noted that job and income growth will continue to strengthen further, and the pace of home price appreciation will moderate. Foreclosures Decrease as Market Recovers DataQuick revealed its monthly Property Intelligence Report (PIR), showing foreclo- sures have decreased in 31 of the 42 report- ing markets over the last month, quarter, and year. Along with a general decrease in foreclosures across the measured markets, DataQuick reported January home price growth leveled off in nearly all markets, even turning negative in some. According to the report, 12 counties have experienced more than a 50 percent drop in foreclosures, including the markets of Los Angeles, Denver, and Washington, D.C. "While indicators such as home price growth have fluctuated somewhat with each report, decreased foreclosure numbers have become a constant occurrence as the market slowly recovers," said DataQuick's VP of analytics, Gordon Crawford, Ph.D. "However, though most markets are seeing month-to-month decline in foreclosures, those counties where foreclosure activity is actually growing are experiencing rapid foreclosure increases. For example, the counties of Long Island, New York and Portland, Oregon have seen a roughly 100 percent increase in foreclosure activity over the past year." e report noted that sales increased in 11 of the 42 counties over the last month, while sales increased in only two of the 42 reported counties over the last quarter. e average yearly home price growth across all 42 reporting markets dropped from 9.9 percent in December to 8.9 percent last month. Housing Affordability Drops in California e California Association of Realtors (CAR) released its Traditional Housing Affordability Index (HAI) in February, revealing declining levels of affordability in the Golden State. e CAR reported only 32 percent of home buyers could afford to purchase a median-priced, existing single-family home in California. e report noted a gradual slowing of home prices in the fourth quarter of 2013, helping affordability. e Index is considered the most funda- mental measure of housing well-being for homebuyers in the state. e median home price for California was $431,510 in Q 4 2013. e figure represents an increase from Q 4 2012, where the median price for a home was $352,450. To purchase a median-priced home in California, homebuyers needed to earn a minimum annual income of $89,240. Com- pared to 2012, where homebuyers needed to earn an income of $66,860, affordability of homes in California has declined for six consecutive quarters. California housing affordability hit a record high of 56 percent in Q1 2012, but has steadily fallen. A lack of housing supply and high demand drove up home prices sharply and significantly reduced affordability. Median Home Price in February for California Source: PropertyRadar STAT INSIGHT $350,000

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