Saratoga News

Homes

The Real Deal

Market balanced after frenzy

Home sales in the Bay Area continued to slow slightly as prices ventured out of double-digit increases for the first time in more than two years as real estate heads toward a more balanced market.

A total of 9,745 new and resale houses and condos were sold in the nine-county region last month. That was up 57 percent from 6,206 for February, and down 13.8 percent from 11,310 for March last year, according to DataQuick Information Systems.

"March numbers are pretty good at predicting upcoming activity. We figure that sales will be good but not spectacular on into the summer and that price increases will stay below 10 percent. We'll probably have a couple of months with new price peaks, but those new records will be reached at a slower rate of appreciation," said Marshall Prentice, DataQuick president.

The median price paid for a Bay Area home was $622,000 last month. That was up 1 percent from February's $616,000, and up 9.5 percent from $568,000 for March a year ago. The median peaked at $625,000 last November.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,958 in March. That was up from $2,889 in February, and up from $2,636 for March a year ago. Adjusted for inflation, mortgage payments are 18 percent higher than they were at the peak of the prior cycle 16 years ago.

Indicators of market distress are still largely absent. Foreclosure rates are coming up from last year's low point, but are still below normal levels. Down payment sizes are stable and there have been no significant shifts in market mix, DataQuick reported.

The use of adjustable-rate mortgages has decreased the last three months. The use of ARMs, which are easier to get and are considered by many to be an indication that buyers are stretching their finances, peaked in May last year at 73.7 percent. Peak usage during the prior real estate cycle was in September 1988 when ARMs accounted for 66.1 percent of all home purchase loans.

"Some of the financing issues at play here are fairly complex and would include this year's higher conforming loan limit, the spread between the cost of an ARM and a fixed-rate mortgage, use of equity lines, and federal regulators who have recently told lenders to lower risk levels," said Prentice. "It's a lot easier to loan somebody money when the collateral is going up in value at more than 20 percent a year than when values are going up at half that rate. What we have here is a market cycle that has passed its frenzy phase and is moving into more balanced territory."

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 pcardus@silvar.org.