SILVAR  :  Newsroom  : Real Estate Articles

Real Estate Articles

REALTOR®: C.A.R. Releases "State of the California Housing Market" Report

Wednesday, March 10, 2010

Affordable home prices, tax credits for home buyers, historically low interest rates, and a large number of distressed properties prompted many first-time home buyers to enter the market in 2009, according to the California Association of REALTORS® 2009-2010 "State of the California Housing Market" report released this week.

The percent of first-time buyers increased dramatically in 2009, from 35.9 percent in 2008 to 47 percent in 2009, according to the report. The share of first-time buyers exceeded the long-run average of 38.6 percent and was the highest since 1995, when more than half of all buyers were first timers.

"It is clear that the federal tax credit for home buyers worked well in 2009 and is continuing to drive home sales," said C.A.R. President Steve Goddard. "The home buyers' tax credit is arguably the most successful strategy employed by the government's efforts to stimulate the economy."

According to a survey conducted by C.A.R. on the effectiveness of the federal tax credit for home buyers, nearly 40 percent said they would not have purchased a home if the federal tax credit was not offered. On the same note, nearly 70 percent of these buyers said the tax credit was either "very important" or "most important" in their decision to buy a home. The large number of distressed properties led to more than half of all first-time buyers purchasing an REO/foreclosure or short sale property.

Statewide, REO/foreclosures and short sales accounted for almost half of all annual sales in 2009, an increase from 35.6 percent in 2008. The median price of distressed properties declined nearly one quarter to $250,000 in 2009 compared with $330,000 in 2008. Meanwhile, the median price of non-distressed properties decreased only 10.4 percent to $485,000 compared with $541,000 in 2008.

One-third of sellers experienced a net cash loss in 2009. Following two consecutive years of significant declines in prices, the median net cash from home sales declined 50 percent last year to $50,000 from $100,000 in 2008.

The lower home prices across the state, however, sent affordability for first-time buyers to record-high levels last year. C.A.R.'s First-Time Buyer Housing Affordability Index (FTB-HAI), which measures the percentage of households that can afford to purchase an entry-level home in California, rose to 64 percent in the third quarter of 2009.

Lower home prices not only encouraged first-time buyers to purchase entry-level homes, but also lured investors. More than 70 percent of properties purchased by investors were either short sales or REO/foreclosures. The typical investment property was 1,367 square feet and had a median price of $232,750.

California's median home price hit bottom in February 2009 at $245,170. Since then, the median home price has increased steadily in month-to-month comparisons, but remained below 2008 levels throughout 2009. The annual median price is projected to increase to $280,000 in 2010 from $271,000 in 2009.

Homes priced $500,000 or less dominated the sales mix throughout 2008 and early 2009, but peaked at 85 percent in January 2009. The high-end market did well too, as the market share of homes sold for more than $500,000 increased from 15 percent in January 2009 to 25 percent in July 2009, holding steady around that figure for the remainder of last year. Sales of high-end homes started picking up in late 2009, with the number of closings for homes priced $500,000 or higher rising 3 percent, and sales of homes priced $1 million or more experiencing their first year-to-year increase since July 2007.

Jeff Bell, president of the Silicon Valley Association of REALTORS®, said agents have reported more activity in recent months. "The demand for housing remains strong in the region. We are looking forward to a more stable housing market this year, as home prices recover and discretionary sellers return to the market," Bell said.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

» Back to Real Estate Articles

Site Navigation