Home Sales in California Drop to Lowest Level in Years

One of the hardest hit states in the nation when talking about home sales is California. For awhile, prices were so high that only few could afford to buy a home in the Golden State. In October of this year, however, the number of home sales in California dropped to the lowest level in about three years.

In the counties of Ventura, San Bernardino, Orange, Riverside and Los Angeles, about 16,750 homes were sold in October 2010. That’s a 7.4 percent decrease from the previous month in which 18,091 homes were sold in those counties. In October 2009, more than 22,000 homes were sold in these counties so last month’s figures reflect an almost 25 percent drop from a year ago. Last month’s sales figures were the lowest they have been since October 2007. During that month, 12,913 homes were sold. Other than 2007, home sales in those California counties have not been this low since 1988.

According to analysts, there are several factors contributing to these historically low home sales. Despite the unusually low mortgage rates, there are few potential home buyers. One reason is because home builders cannot build the homes at a cost low enough to entice buyers because of the large inventory of existing homes. Many of the existing homes that are for sale are either foreclosures or short sales. These are typically priced lower than other homes, even newly-built homes, which is one reason why many potential buyers choose these instead of new homes.

Another reason for the low rate of home sales is the credit qualifications. Even though homes have dropped drastically in price, credit is not as readily available as it once was which is creating a bottleneck between buyers and home sales. Even those who are qualified for a home purchase cannot get a mortgage loan unless they have high credit scores and an impeccable credit history.

Foreclosures in the southern California area have accounted for almost 35 percent of home sales in October 2010. Last year at this time, foreclosures in the region accounted for about 40 percent of home sales while in September 2010 they accounted for about 33.6 percent. Home prices have also dropped an average of 4.2 percent in the last year throughout the SoCal region. Flippers, or people who buy homes and then resell them, accounted for nearly 4 percent of the home sales last month, which is nearly a one percent increase over last year at this time.