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IRVINE, CA-The housing market in California is stabilizing, with more builders raising prices than dropping them, according to a new survey by a locally based firm. The John Burns Real Estate Consulting September survey of home builders shows that, for the first time since Burns began its home builder executive survey 15 months ago, “more California builders reported raising prices than those who reported prices were flat or down,” says Jody Kahn, a Burns vice president.

CEO John Burns adds that, “The survey confirms our belief that the market bottomed in the Spring, and that it is highly likely there will be another leg down late this year or early next year.” Commentary from those who were surveyed “underscores the positive effect of federal intervention,” the Burns survey notes, although most builders also expressed concern about their prospects for the next six months as the Nov. 30, 2009 expiration of the federal tax credit approaches. Other challenges cited include ongoing competition from foreclosures, continuing appraisal problems, lack of job creation and a void in financing for future projects.

Among the highlights revealed by the survey were that net sales per community increased nationally this month to 2.0 from 1.4 last month, cancellation rates continue to drop between 1% and 15%, prices are appreciating in California but flat elsewhere and starts declined in all but two of the 10 regions of the country.

Regarding the increase in net sales per community, the survey showed that the gains were driven by improved affordability, low conventional mortgage rates, and especially by the urgency around the first-time buyer federal tax credit. “There are plenty of reports of rising prices at lower price points, and spotty reports of sales gains at higher price points,” Burns says.

Regarding cancellation rates, some 61% report rates dropping between 1% and 15%. “The majority of builders are targeting entry level buyers, who don’t have a home to sell,” according to the survey. Builders also report they stopped accepting contingent sales from buyers with homes to sell, which has reduced cancellations. “Appraisal problems continue, but builders fight the low values and eat the unresolved difference to avoid losing the sale,” according to the Burns.

California price appreciation and stability compare with reports of emerging price stability in a growing number of metros that “are balanced by numerous reports of continued downward pressure on pricing from foreclosures and short sales.” In almost all markets, the lower price points are faring better than the higher price points due to FHA financing and the Federal tax credit, Burns consulting notes.

Regarding starts, Burns reports that only Southern California and Northern California reported increased starts since last month. Many smaller, private builders lack financing to start new construction, sometimes even for pre-sold homes.

This month’s survey sample consisted of 269 home building industry executives from public and private companies (62 from California). In total, their insight is reflective of on-the-ground conditions in 86 MSAs and 1,855 communities.

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