The price of the typical California single-family home gained more than $22,000 last year-a little over half the ground lost since 1991.
The median price hit its lowest level in the long, erratic slide- $167,790-last February, but by December it had risen to $189,990, according to new data from the California Association of Realtors. The figure had peaked in 1991 at $211,000.
Most of the increase came in the second half of 1997, when homes in the state's southern counties finally began appreciating. "Until May, increases were focused in the Bay area," said G.U. Krueger, the group's deputy chief economist.
With the south beginning to catch up, "it's clearly a sign we're doing fine now," he said of the California market.
Homes in the Silicon Valley counties-Santa Clara, San Mateo and Marin counties-are already selling for more than they did in the early '90s, Mr. Krueger said.
Home price appreciation in Southern California reflects the region's restructured economy, which is less dependent on aerospace and military contractors than in the early '90s. Entrepreneurial software and entertainment companies now play a bigger role.
The rise also reflects the return of trade-up homebuyers to the market. Of all homes sold, 60% were to repeat homebuyers-the highest proportion since 1990, according to the Realtors' 1997 housing finance survey.
Trade-up houses are bigger and more expensive-pushing up the median price of resold homes.
Prices are also climbing because of tight supply. In December, the number of existing single-family homes for sale equaled a 5-month supply, down from 7.1 months a year before.
Mr. Krueger said supply is tight because homeowners are still hesitant to put their homes on the market. They're waiting for prices to return to higher levels.
By one measure, the declining percentage of homes with so-called underwater mortgages-those exceed home value-homeowners should be increasingly willing to sell. The percentage fell last year to 1.3%, the Realtors estimated, from 5% in 1996 and 9% in 1995.
Another sign of the market's returning health is that sellers are getting prices closer to what they ask. The median difference between the asking price and sales price was 3.5% in 1997, down from 3.8% in 1996.
Mr. Krueger said it's unlikely the median home prices will return to their 1991 peak this year. Low rates will help, he said, but the Asian slowdown should hurt by dampening the state's export-heavy economy.
He cautioned that the state's northern counties are "in danger of overheating."
"We might lose the first-time homebuyer there," he said. If that happens, "for a while home prices will continue to go up, because demand is so strong and people are stretching as much as they can," Mr. Krueger said. "Then prices hit a wall," increasing only gradually or even flattenning.