Let's hope that the old adage is true that everything starts out in California. The Wall Street Journal reports that the California real estate market might finally be on the mend. From the WSJ:

California's median price for an existing single-family house rose for the third straight month, a sign that the state's battered real-estate market may be bottoming out.

The median sales price increased to $267,570 in May for a California home, an increase of 4.2% from April, according to a report released Thursday by the California Association of Realtors. The inventory of unsold houses continued to drop, to 4.2 months' supply in May compared with 4.6 months in April and 8.7 months in May 2008. Prices were still well below their year-ago levels, down 30.4% compared with May 2008.

The article goes on to explain that home prices are increasing, at least in part, because a smaller percentage of home sales were foreclosed properties. As inventories continue to drop, so will that percentage.

Californians certainly have some reason to celebrate, but they should not get ahead of themselves. Their state still has other serious economic turmoil beyond just home prices, like its fiscal crisis.

What does this mean for the rest of the nation? Too soon to tell. Many states have very difficult internal issues to overcome. States like Florida, Arizona and Nevada have housing markets that need to improve on their own, with little other industry to pick up the slack. Michigan has to deal with the fallout of the Chrysler and GM bankruptcies. New York has layoffs and lower revenues in their financial and legal profit centers.

While I'll be the first to cheer California's news as a step in the right direction, the U.S. economy still has a long, long way to go.

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