Some home prices fall, but not here

Valley Press on ^ | Sunday, September 25, 2005. | ANN WISHART

[BenLurkin]

LANCASTER [California]- Prices paid for existing homes in the Antelope Valley rose more than 20% in the last year, while some areas of Santa Monica and Pasadena saw median home values fall 20%. Reports from the Data Quick News service support projections from the California Association of Realtors, or CAR, that the rate of home-price appreciation will moderate next year. Sales in 2006 will decline slightly from this year's record pace, according to the Association's "2006 Housing Market Forecast" released Sept. 20 to 22.

That prediction appears to be coming true in Santa Clarita, where, of less than 100 existing homes sold in August 2005, prices had increased less than 18% over median prices in August 2004, according to DQNews. The median home prices ranged from $544,000 to $658,000.

Just as the Antelope Valley was caught behind the curve when prices started to escalate four years ago in more urban communities, median prices seem still to be rising.

The median price of a home in west Palmdale was $391,000 last month, an increase of 8.6% from a year ago. But in east Palmdale, which has seen a building boom and retail growth, median prices rose around 30% from August 2004 to August 2005, bringing the median price of an existing home into a range between $233,000 and $341,000.

Lancaster saw a rise of median home prices ranging from $270,000 in downtown Lancaster - up 33.3%- to a median of $330,000 - up 22.2% since August 2004.

The median home price in California will increase 10% to $575,500 in 2006 compared with a projected median of $523,150 this year, according to the association, while sales for 2006 are projected to reach 630,610 units, falling 2% compared with 2005.

The double-digit gain in the median price of a home, which California has experienced for most of the past five years, will again be fueled by the continuing shortage of housing across much of the state, according to association economists.

California typically gains nearly 250,000 new households each year, yet only will build about 200,000 new housing units in 2005, creating a shortfall of about 50,000 units.

"We expect the fixed mortgage interest rate to rise to 6.4% next year, and the adjustable rate to hit 5.1%, which will make it more difficult for many families in California to be able to afford a home," CAR President Jim Hamilton said.

"While still near their historic lows, up-ticks in interest rates coupled with the continued increase in the median home price will push affordability in California to a new all-time annual low of 15% next year."

"The economic fundamentals at both the state and national level continue to support a strong housing market in the Golden State for the foreseeable future," said Leslie Appleton-Young, CAR vice president and chief economist.

"However, we also expect that the wave of new loan products that have flooded the market over the past several years have injected a higher level of risk into the market, while affordability barriers to homeownership will continue to push residents inland and even out of state.

"Declining affordability will constrain sales in 2006 at a greater rate than we've previously experienced, especially in markets where there are higher price points compared with the state as a whole," she said.

"Not all areas of the state will continue to experience the unprecedented double-digit median price increases of the past five years. Some high-cost areas, especially those in the more costly coastal regions, face a potential leveling off of median price gains compared with the 10% gain we expect for the state as a whole."

Home sales for California in 2005 are expected to reach a record 643,480 units, surpassing the prior sales record of 624,740 set in 2004, according to CAR economists.

The lack of housing affordability and availability in Southern California has drawn criticism from Roy Bernardi, U.S. Deputy Secretary of Housing and Urban Development. He and other officials recommended streamlining the regulatory process to help remove barriers to affordable housing, according to Jeff Lustgarten with the Southern California Association of Governments.

"Working with local government, industry and community leaders we can remove unnecessary or excessive regulations and lower the cost of homes by 10%, 20% even 30%," Bernardi said.

The Southland faces a housing crisis that is pushing home ownership further out of reach for families across the region, officials said.

[neb52]

I just saw on a Real Estate form of a lender offering 35-40 year fix rate loans. I wonder if this will come into play more so if the market in hot places cool off and stablize.