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C.A.R. Forecasts Cooling Home Sales, Modest Price Decrease in 2007

Wednesday, October 25, 2006

After several years of steep increases, the housing market will see a modest decline in the rate of home price appreciation next year and the sales pace will decrease, as the market continues to stabilize throughout 2007, according to the California Association of Realtors® (C.A.R.) "2007 California Housing Market Forecast" released last week. The forecast was presented during the California REALTOR® EXPO 2006 (www.realtorexpo.org), held Oct. 17 – 19 at the Long Beach Convention Center in Long Beach, Calif.
 
The report predicts the median home price in California will decline 2 percent to $550,000 in 2007 compared with a projected median of $561,000 this year, while sales for 2007 are projected to decrease 7 percent to 447,500 units, compared with 481,200 units (projected) in 2006.
 
"The housing market clearly downshifted in 2006 from the record-setting sales and robust price gains of the last few years," said C.A.R. President Vince Malta. "The residential real estate market in 2006 was characterized by a gap between buyer and seller expectations. Sellers sensed that the peak of the market was approaching, yet still hoped to obtain the highest possible prices. Buyers' sense of urgency waned as the number of homes on the market grew and they took longer to identify and subsequently purchase a home.
 
"Although the 2007 sales decline is not expected to be as steep as what we experienced this year, the psychology of the market — matching the differing expectations of sellers and buyers — will continue to be a factor as Realtors® help consumers navigate their way through a changing market.
 
"While we're projecting a modest decline in the median price of a home, over the long term, residential real estate in California has been and will continue to be a solid investment. Since 1968, the long-term average price appreciation is 9.1 percent," he said.
 
C.A.R. Vice President and Chief Economist Leslie Appleton-Young said, "While we recognized that the frenetic sales pace of the past four years could not continue indefinitely, the housing market in 2006 did not fare as well as we initially expected."

Appleton-Young explained that the anticipated slowdown that began in October 2005 was heightened by dual natural disasters in the Gulf Coast, a significant drop in consumer confidence, rising energy and raw materials costs, and a series of Federal Reserve interest rate hikes that began in June 2004. Fixed-rate mortgages also hit and passed the psychological threshold of 6 percent, while adjustable rate mortgages passed 5 percent, ultimately causing a decline in affordability.

"Affordability concerns also will continue to constrain sales for many households in California throughout 2007, especially for first-time home buyers," said Appleton-Young.
 
"Looking to 2007, we expect that some regions of the state, including the Central Valley, San Diego and Riverside/San Bernardino regions, will experience sales declines greater than the state as a whole," she said. "That also holds true for several second-home markets, including the desert areas of Southern California and the Wine Country."

The "2006 Use of Technology Survey," conducted during the second quarter of 2006, was also released by C.A.R. last week. The survey tracks current trends in technology used by Realtors on topics ranging from computer and technology usage to Internet needs and adoption.

Highlights of C.A.R.'s "2006 Use of Technology Survey" include:
• 40 percent of Realtors' business was generated from the Internet in 2006, compared with 19 percent in 2003.
• A digital camera was the most important technological purchase or upgrade considered by respondents this year.
• Realtors with high-speed Internet access increased to 95 percent in 2006 compared with 71 percent in 2003.
• Half (48 percent) of Realtors use their computer to conduct their real estate business at home.
• 47 percent of Realtors surveyed said e-mail was their primary means of communication, while 9 percent considered in-person contact as their primary means of communication with clients.
• Nine of 10 Realtors (87 percent) used the Internet for marketing or farming purposes.
• Although Internet marketing has grown, Realtors continued to spend more of their marketing budget on print advertising than on online advertising. Only 10 percent spent more of their marketing budget on online advertising than on print advertising.

Realtors, affiliate members and board directors of the Silicon Valley Association of Realtors® (SILVAR) attended the California REALTOR® EXPO 2006 in Long Beach to learn more about future trends and changes in the real estate industry. The trade show attracts more than 12,000 attendees each year and is the largest state real estate trade show in the nation.     


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.

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