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REALTOR®: NAR Survey Shows Home Buyers Responding to Lower Metro Price

Wednesday, August 27, 2008

Existing-home sales rose from the first quarter in 13 states, largely from buyers responding to discounted home prices, according to the latest quarterly survey by the National Association of Realtors®. Nearly one-quarter of metropolitan areas showed rising home prices in the second quarter from a year ago, with greatly mixed conditions continuing around the country.

In the second quarter, 35 out of 150 metropolitan statistical areas showed gains in median existing single-family home prices from the second quarter of last year, while 115 had price declines. NAR's track of metro area home prices dates back to 1979.

NAR President Richard Gaylord said foreclosures are distorting the price data. "In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement cost values," Gaylord said. "Many buyers with long-term expectations are getting exceptional value in the current market. Once the inventory is drawn down, price pressure will return because the costs of construction are rising – today's buyers are very well-positioned to build wealth over time."

Because foreclosures and short sales are accounting for about one-third of transactions, there is a downward pull to the national median price. In the second quarter, the median existing single-family home price was $206,500, down 7.6 percent from the second quarter of 2007 when it was $223,500. The median price is where half of the homes sold for more and half sold for less.

Lawrence Yun, NAR chief economist, said a clear cause-and-effect response has developed in the housing market, with buyers responding to deeply discounted home prices. "The biggest home-sales gains over the previous quarter have been in some of the markets with the steepest and fastest price drops," Yun said.

Compared with the first quarter, existing-home sales increased 25.8 percent in California, 25.0 percent in Nevada, 20.5 percent in Arizona and 10.1 percent in Florida.

"The momentum of buying is likely to continue in light of the housing stimulus package that was recently enacted," Yun said. "About 2.5 million first-time buyers are expected to take advantage of the $7,500 tax credit between now and the middle of next year."

In Silicon Valley, prices are holding well. A July report from the California Association of Realtors ranked Los Altos and a couple of other Silicon Valley communities neighborhoods among the top cities with the highest median price in June. Statewide, the 10 cities with the highest median home prices in California during June 2008 were: Manhattan Beach, $1,942,500; Los Altos, $1,595,000; Burlingame, $1,575,000; Newport Beach, $1,325,000; Mill Valley, $1,150,000; Los Gatos, $1,143,000; Cupertino, $1,072,500; San Carlos, $1,022,500; Danville, $965,000; Santa Barbara, $950,000.

Statewide, the 10 cities with the greatest median home price increases in June 2008 compared with the same period a year ago were: Manhattan Beach, 49.4 percent; Cupertino, 33.3 percent; San Luis Obispo, 11.4 percent; Los Gatos, 3 percent; San Carlos, 1.5 percent; Sunnyvale, 1.4 percent; Ridgecrest, 1.4 percent; Campbell, 1.3 percent; Temple City, 0.9 percent; San Rafael, 0.8 percent.

Mark Burns, past president of the Silicon Valley of Realtors said, "Inventory figures show that areas farther out in the Valley (Morgan Hill, Gilroy, South Valley, East Valley, etc.) have a much higher level of inventory. Areas like Cupertino, Sunnyvale, Los Altos, and other areas along the west side have much lower levels of saleable inventory. I attribute this to that old adage, 'Location, location, location.'"

"I've always been a firm believer that you choose whether you can get along with a smaller home and fewer amenities or must have something larger and better equipped," said Burns. "That choice involves schools, commute, services, shopping, and convenience. It is all about compromise and sacrifice. If you could get everything you want affordably; you wouldn't appreciate it as much and neither would others down the road who would be in the market to buy it from you."

Burns elaborated on reasons why the demand for homes in the Silicon Valley region continues to be high in comparison to other parts of the state. "It's not that these other places have poor schools. On the contrary, their schools score very well statewide and nationally, but the distance for many to commute to most employment centers is much longer and that brings two problems. Quality of life declines (time spent at home, with friends, family, etc.) when you are in the car two to three hours a day, five days a week.

"Since the cost of gas has roughly doubled in the past two years, many people want to be closer to work, take rapid transit, telecommute, etc. to ease the pain. It costs more to live in some areas. That's the balance that always comes into play. It has been that way all of my life and I expect it to continue well into the future," Burns concluded.


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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