November 30th, 2009 10:15 AM by Lehel S.
At a time when home sales traditionally wane for the year, buyers are swooping in for deals and taking advantage of a federal tax credit for first-time homebuyers.
As a result, statewide home values were up for the eighth month in a row in October, according to a report released Wednesday.
But with unemployment and more foreclosures on the horizon, Realtors and economists alike are wondering how long the frenzy will last, once the federal money runs out.
"It's a temporary fix," said Marty Rodriguez, a Monrovia Realtor. "What are you going to do when that stimulus is gone?"
For now, that stimulus has led to a 1 percent increase in home sales in California during October, compared to the same period a year ago, according to the California Association of Realtors.
And while the statewide median price - $297,500 - was 3.2 below last year, the gradually rising prices of homes was a positive sign, CAR Vice President and Chief Economist Leslie Appleton-Young said.
That, coupled with similar rises nationally and a decrease in inventory, are giving industry observers hope for a stronger housing market.
"If you're looking for a sign that builders will need to start swinging their hammers again soon, this is it," wrote Mike Larson, a real estate analyst at Weiss Research.
He was responding to a Commerce Department report out on Wednesday that said sales rose 6.2 percent to a seasonally adjusted annual rate of 30,000 in October from an upwardly revised 405,000 in September.
With that, 239,000 new homes for sale at the end of October, the lowest inventory level in nearly four decades.
At the current sales pace, that's a 6.7 months of supply, down from last winter's peak of more than a year.
The Los Angeles County, San Gabriel Valley and Whittier areas were a mixed bag.
Los Angeles County ($325,000) was 9.7 below where it was in October 2008, and West Covina ($347,000) was still 6.2 below its year-ago median price.
But Altadena ($450,000) was up 4.7 percent. Whittier ($315,000) was 8 percent below what it was last year.
In contrast to eight months in a row of price increases statewide, the local area has been a little more spotty.
The median home price in El Monte jumped to $333,000 in September from $295,000 in August, but dipped to $330,000 in October.
Still, buyers are pushing the price up, taking advantage of an $8,500 federal tax credit that Congress extended and expanded.
Home shoppers in October were acting before lawmakers decided to extend the credit for first-time buyers and expand it to some existing homeowners. The credit now covers contracts signed by April 30, and analysts expect it to further the housing recovery in the coming months.
"It's all thanks to the government," said Jennifer Lee, an economist at BMO Capital Markets.
But with unemployment in L.A. County nearing 13 percent, Rodriguez and others wondered what will happen once that credit ends.
"Credits are motivating a lot of people to buy," Rodriguez said. "If those credits are gone. My job will become more challenging."
Rodriguez worried about a cash-for-clunkers scenario - where government rebates spurred the auto sales market for about two months, only to shut off completely, once the rebate period ended.
Kyser was skeptical about Congress' resolve to extend the credit again, given political worries about the nation's ballooning deficit.
The housing market is also not out of the woods, because even as first-time homebuyers swoop in, many are swooping out as they lose their jobs.
That means more foreclosures, Kyser said. That could put more pressure on prices to fall again, he added.
"A lot of people are quite concerned we're going to see more foreclose properties hit the market in 2010," he said. "These are people who took out bad loans. But it's also because of unemployment...people are falling behind. There will be people who just decide to give back the keys."
The Associated Press contributed to this story.