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The Real Deal
Interest rates help offset high home prices
By Jean Newton
The percentage of households in California able to afford a median-priced home improved by two percentage points in May, while sales of existing homes in California fell 12.9 percent and the median home price rose to 6.9 percent compared to the same period a year ago, according to a report by the California Association of Realtors and Real Estate Solutions, a real estate information service.
The May 2001 Housing Affordability Index stood at 33 percent, up two points from May 2000, yet down one point compared to April 2001, when it stood at 34 percent.
"Lower interest rates continue to favorably impact affordability in the state," said California Association of Realtors President Gary Thomas. "The 1 percent decrease in mortgage rates from a year ago has helped offset a 6.9 percent increase in the median home price."
The California Association of Realtors' monthly housing affordability index measures the percentage of households that can afford to purchase a median-priced home in California. The index is the most fundamental measure of housing well-being in the state.
At 11 percent, San Francisco remained the least affordable county in the state, followed by Contra Costa at 13 percent and Santa Cruz at 14 percent. For the San Francisco Bay Area, affordability was 19 percent. Santa Clara County was 21 percent, compared to 17 percent one year ago.
Although housing affordability is improving in some areas, and there is an increase in the median sale price, there has also been a downturn in sales of existing homes.
"The California housing market continued to be a bright spot among mixed signals on the state and national economic fronts," said Thomas. "Even with the year-to-year decline in sales last month, 2001 looks to be one of the best years on record for California real estate."
Closed escrow sales of existing, single-family detached homes in California totaled 505,590 in May at a seasonally adjusted annualized rate, according to information collected by the California Association of Realtors from more than 90 Multiple Listing Services statewide. Statewide home resale activity decreased 12.9 percent from a 580,540 sales pace recorded in May 2000. Resale activity posted an increase of 2.1 percent in May compared to April.
The median price of an existing, single-family detached home in California during May 2001 was $257,060, a 6.9-percent increase over the $240,470 median for May 2000, the association reported. In Santa Clara County, a median priced home is listed at $532,500.
"After nearly a year and a half of double-digit increases, the median price of a home in the San Francisco Bay Area rose only 3.4 percent in May," said Leslie Appleton-Young, vice president and chief economist for the California Association of Realtors. "While there's still robust demand for entry- and mid-level homes, the upper end of the market is definitely feeling the impact of the volatile tech economy in the Silicon Valley. That said, a median-priced home in the Silicon Valley is still over a half-million dollars."
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Los Gatos, California Since 1881
