California racked up the strongest price increase in the nation during the fourth quarter in the Sacramento and San Diego areas, while the San Francisco Bay Area experienced double-digit price gains. Statistics from the California Association of Realtors and Real Estate Solutions, a real estate information service, showed 94.4 percent of California cities and communities had an increase in their respective median home prices for the fourth quarter of 2002 compared to the same period a year prior.

The median price of an existing, single-family detached home in California hit a new record during the fourth quarter of 2002, rising 21.4 percent to $333,240, according to a report by the association and Real Estate Solutions. For the year as a whole, the median price of an existing, single-family detached home hit a new annual record at $315,870, a 20.4 percent increase compared to 2001.

The median price of an existing home in Los Gatos in January was $1,127,000, compared to $905,000 the year before. In Saratoga, the median price in January 2003 was $1,300,000, compared to $1,125,000 in January 2002. Saratoga was included in the top 10 cities and communities with the highest median home prices in California during the fourth quarter of 2002. With a $990,000 median home price for the fourth quarter, Saratoga was in the company of Hillsborough, $1,850,000; Belvedere/Tiburon, $1,200,000; Pacific Palisades, $1,038,500; Los Altos, $1,010,000; Beverly Hills, $1,010,000; Malibu, $885,000; Palos Verdes Estates, $845,000; Manhattan Beach, $840,000; and Newport Beach, $825,000.

As a comparison, the national median home price was $161,000 in the fourth quarter, or 8.8 percent higher than a year earlier, when the median price was $148,500. The median is a typical market price where half of the homes sold for more and half sold for less. Home prices typically rise one to two percentage points faster than the general rate of inflation. The National Association of Realtors estimates that consumer price inflation in the fourth quarter was at an annual rate of only 1.6 percent.

Inventory shortfalls are continuing to squeeze home prices in many areas. According to David Lereah, the National Association of Realtors' chief economist, the tight supply of available homes has persisted for several years, and the result is that home prices in the fourth quarter rose almost three times faster than historic norms. Low interest rates have also played a role and helped raise the purchase power of the typical buyer.

Thirty-year fixed mortgage interest rates averaged 6.07 percent during the fourth quarter of 2002, down from 6.78 percent in the fourth quarter of 2001, according to the Federal Home Loan Mortgage Corp. Adjustable mortgage interest rates averaged 4.18 percent in the fourth quarter of 2002, down from 5.24 percent in the fourth quarter of 2001.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.