The median price for Californian homes rose 4.2 percent to $267,570 in May, the third straight monthly increase, according to the California Association of Realtors.

Other good news is that the inventory of unsold homes dropped to 4.2 months, compared with a 4.6-month supply in April.

That indicates the Californian real estate market, the country’s largest and most important, is recovering.

“With affordability for first-time buyers at a record high, sales of existing, single-family homes continued to remain above the 500,000 level for the ninth consecutive month,” said James Liptak, president of the California Realtors’ group.

“Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates, and first-time home buyer tax credits, may not align again for many years.

But the median price increase might be from banks selling fewer foreclosures rather than an increase in home prices across the board, Kirk Lesh, an economist with California Lutheran University’s Center for Economic Research and Forecasting, told The Wall Street Journal.

Prices are still down 30.4 percent from a year ago, while sales are up 35.2 percent from May 2008.

The bad news is that unemployment will surpass 12 percent by the end of they year, according to the quarterly UCLA Anderson Forecast.

"California is in for a continued rough ride for the balance of 2009 and is not going to see economic growth return until the end of the year," wrote Jerry Nickelsburg, a senior economist with UCLA Anderson.