Real Estate

CAR: Home prices increase 29.8% in July, sales end six-month slide

Higher interest rates failed to halt homeowners in July, as sales increased at the best pace in more than a year and double-digit price gains continued for the 13th-consecutive month.

Closed escrow sales climbed to an annual rate of 443,520 homes in July, a 7% increase from July 2012, according to the California Association of Realtors. The year-to-year sales increase was the first since December, and ended six consecutive months of declines.

Thirty-year, fixed-interest mortgage rates inched up to 4.37% in July, compared to 4.07% in June and 3.55% in July 2012.

“The spike in interest rates in June prompted homebuyers to delay escrow closings in hopes that rates would fall back,” says California Association of Realtors President Don Faught. “As buyers recognized rates had stabilized, they moved forward to close escrow, which lifted July’s sales from both the previous month and year.”

July’s median-home price – meaning half the homes sold for more, the other half for less – reached $433,760, a 29.8% increase from a year ago. Home prices have increased 17 straight months.

newport beach 1Marin County is the priciest market at $1 million – the only county above the million-dollar threshold – followed by San Mateo County at $919,000. Glenn and Siskiyou counties had the lowest median price at $140,000 in July.

“A constrained supply of homes over the past year has fueled robust home price increases, particularly in the coastal regions,” says Leslie Appleton-Young, vice president and chief economist for CAR.

“Looking ahead, we should continue to see strong price growth but at a less accelerated pace than what we’ve experienced over the past year,” she says. “Inventory areas are starting to build in some areas as price gains free up previously underwater homes and encourage homeowners reluctant to list because of the scarcity of homes to purchase.”

Some closely watched figures remained steady last month – the available supply of homes for sale was 2.9 months and the average days on the market was 29 days, according to CAR.

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Fewer home shoppers able to buy with fast-rising prices, higher interest rates

California homeowners are cheering double-digit price gains, but home-shoppers are jeering, as more are unable to purchase their piece of the American Dream.

Fast-rising home prices coupled with higher interest rates – 3.64% today vs. 2.82% a year ago — have greatly curbed the number of families able to buy homes in recent months.

Only 36% of homebuyers could afford the median-priced home during the second quarter, the first time affordability dropped below 40% since third-quarter 2008, according to the California Association of Realtors.

Affordability was at 44% in the first quarter, and 51% in second-quarter 2012, according to the industry association.

The Bay Area is the most expensive market in California.
The Bay Area is the most expensive market in California.

How much does fast-rising home prices affect affordability? The average homebuyer needed to earn at least $80,000 to qualify for the median-priced home of $415,770 during the just-completed quarter.

Homebuyers who earned $62,400 per year could afford the median-priced home — $316,490 – a year ago.

The Bay Area, as always, remains the most difficult market for homebuyers. Only 17% of homebuyers could afford homes during the second quarter in San Francisco and San Mateo. A year ago, about one of every four homeowners could afford a home in those counties.

Santa Barbara was the second-least affordable market at 18%.

Madera County – just north of Fresno – remains the most affordable market, at 71%. But even that county’s affordability has dropped from 77% a year ago.