Real Estate Articles
Bay Area Leads Way in California Housing Market Recovery
"We are in a recovery, but we are in a tough recovery," California Association of REALTORS® vice president and chief economist Leslie Appleton-Young told REALTORS® at a Silicon Valley Association of REALTORS® meeting in Palo Alto last week. She added that the Bay Area is leading California's housing recovery.
Appleton-Young said the country has experienced the worst housing market downturn since the Great Depression, and for a time, "California was on sale." Prices hit bottom in February 2009, but in May of this year, home sales posted the third largest increase on record and for the fifth month, saw double-digit gains in the median price. From the time prices hit bottom, the median price of single-family detached California home has risen 32.3 percent, from $245,230 to $324,430.
Appleton-Young said right now, nationally and even in the state, pending sales have dropped as expected with the expiration of the deadline for qualified buyers to sign a purchase contract. But she stressed that real estate is all about micro-markets and REALTORS® should use the local data to speak for market conditions.
"You need to pay attention to local numbers because what's happening nationally can be irrelevant and misleading," Appleton-Young said.
"Right now, the Bay Area is leading California's recovery because the area has fewer subprime loans and this area is truly unique, with unique properties," she exclaimed.
In May a total of 8,264 homes closed escrows in the nine-county Bay Area, up 18 percent from April and up 11 percent from May 2009, according to the real estate information service MDA DataQuick. In Santa Clara County, sales were up 28.2 percent from the previous year and the median price of $525,000 was up 18 percent from $445,000 in May of 2009.
In the Bay Area, the median price of an existing detached home in May was $592,930, up 28.9 percent from May 2009. The median has increased because the high-end is making a comeback as there is a little more willingness on the part of sellers to take concessions; there are less distressed properties in the Bay Area compared to the rest of the state; and the jumbo market has started loosening for high-end borrowers.
According to the state trade group's figures, California topped the nation last year with 10 percent market share of all FHA lending; over half of the homes sold in 2009 received multiple offers; 19.6 percent were cash sales; and 12.1 percent were purchased for investment property.
Appleton-Young said the market continues to be driven by fear, as seen in the stock market, but she believes "the worst is over." She forecasts a 3 percent GDP growth for 2010 and sees sales next year as being good, but not as high as this year because of less distressed properties in the market and absence of government stimulus programs. She does not see a bad shadow inventory of distressed properties since banks are not taking homes back because they cannot recognize the big losses. She also sees the state facing additional set of challenges in relation to state and local budgets.
Appleton-Young's big worry is in five to 10 years California will see the beginning of a housing shortage. She said there has been an 83 percent drop in building of new homes since 2004, yet household growth for the state is projected at approximately 200,000 a year.
"Housing starts are the precursor of a downturn and the leading indicator to a recovery," Appleton-Young noted.
Buyers have more options today, and Appleton-Young continued to stress it is still a very good time for buyers – the inflation inertia is low and mortgage rates are at a 50-year low, with the fixed-rate mortgage that day at 4.58 percent.
"I can't imagine a world where interest rates will be lower next year than this year," Appleton-Young remarked.
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.
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