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| Best Year on Record for California Housing Market, But Rapid Price Appreciation Challenging First-Time Homebuyers, According to C.A.R.'s 'State of the Housing Market 2003' Report |
LOS ANGELES, Dec. 22 /PRNewswire/ -- The California housing market is
poised to finish 2003 by setting new records across the board for the second
consecutive year, according to the California Association of REALTORS(R)
(C.A.R.) "State of the Housing Market 2003" report released today.
"The housing market in 2003 is on course to break several records that
were set in 2002," said C.A.R. President Ann Pettijohn. "Sales of detached
existing single-family homes are expected to exceed 2002's record-setting pace
of 572,500 units, increasing 4.2 percent to 596,500 units this year. The
median price will easily achieve a new high in 2003, reaching $369,500, a
17 percent increase over 2002."
The market has benefited over the past two years from the lowest mortgage
rates in more than a generation, according to C.A.R. economists. Moreover,
strong demand relative to supply has contributed to significant increases in
the median price as the state's population has grown by 600,000 people per
year, while new home production has fallen short of statewide household growth
by at least 40,000 units for the past several years.
Repeat Buyers Dominate Market
Repeat homebuyers, who accounted for 70 percent of home sales in 2003,
have increasingly dominated the residential real estate market, according to
the report. Their market share has climbed steadily since the mid-1990s, when
repeat buyers represented 50 percent of all homebuyers.
"Because repeat buyers have reaped equity gains on the sale of previous
homes in recent years, and have rolled much of those gains into the purchase
of their next home, their home financing decisions have applied tremendous
upward pressure on home prices," said C.A.R. Vice President and Chief
Economist Leslie Appleton-Young.
Repeat homebuyers are primarily Baby Boomers in their peak income-
producing years, who have a median age of 45 years and a median annual income
of $100,000, according to the report.
Low Interest Rates Benefit First-Time Homebuyers
Comprising 30 percent of the market and with somewhat fewer financial
resources, first-time homebuyers have nevertheless been a force in the
California housing market over the past year. Relying primarily on savings
for their downpayment, and more likely to take out a second mortgage than
repeat buyers, first-timers have taken advantage of the low interest rate
environment.
"Instead of being discouraged by increasing home prices, many first-timers
take a more positive alternative by purchasing more affordable units such as
condos or townhomes that requires smaller downpayments and lower monthly
mortgage payment than detached homes," Appleton-Young said.
First-time homebuyers have a median age of 33 years, earn a median
household income of $75,000, and typically are married, although just over
one-third of first-timers are single. First-timers also purchase a less
expensive home than the statewide median ($307,500 compared to $375,000), and
are more likely to view condominiums as a more affordable option -- 44 percent
all condominium purchases are made by first-time buyers. The survey also
revealed that one out of three first-timers take out a second mortgage to
avoid paying private mortgage insurance (PMI).
"Yet despite the fact that there is a wider array of first-time homebuyer
financing programs than ever before, first-time homebuyers as a share of all
homebuyers have never been lower in the history of C.A.R. housing market
research," Appleton-Young said. "With tight market conditions and repeat
homebuyers driving the market, rapid price appreciation has left homeownership
out of reach for many prospective first-time buyers."
Inventory, time on market at record lows
Across the state, inventory levels have been at record or near-record lows
for most of the past two years, ranging between two and three and one-half
months since early 2002. Time on market has ratcheted downward for eight
consecutive years, and now stands at just two weeks, while the median price
discount -- the difference between list and sale price -- was at 0.9 percent -
- the sixth consecutive year when the discount has been below 2 percent.
Housing Affordability Deteriorating
Favorable mortgage rates kept housing affordability from deteriorating
throughout 2002 and the first half of 2003 despite strong price appreciation
over that period. Over that time interval, the C.A.R. Housing Affordability
Index hovered in the range of 30 percent, meaning that 30 percent of
California households could afford to buy the median-priced home. Once
mortgage rates bottomed out in mid-2003, affordability dropped below
25 percent for the first time in over a dozen years, raising concerns about
access to homeownership on the part of first-time homebuying households.
To purchase C.A.R.'s "State of the Housing Market 2003" call
(213) 739-8352 or e-mail maryp@car.org. Cost for an electronic version is
$29.95 for C.A.R. members and $59.90 for non-members; and $49.95 for a hard
copy for C.A.R. members and $99.90 for non-members.
The California Association of REALTORS(R) ( http://www.car.org ) is one of
the largest state trade organizations in the United States, with more than
130,000 members dedicated to the advancement of professionalism in real
estate. C.A.R. is headquartered in Los Angeles.
SOURCE California Association of REALTORS
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CONTACT:
Media, Mark Giberson of California
Association of REALTORS, +1-213-739-8304, markg@car.org
