Los Gatos Weekly-Times

Homes

July existing-home sales down, prices soften

By Rose Meily

Existing-home sales were down in July, while home prices in many areas are slightly below year-ago levels, according to the National Association of Realtors. Total existing-home sales--including single-family, townhomes, condominiums and co-ops--dropped 4.1 percent in July and were 11.2 percent below the July 2005 level.

David Lereah, chief economist for the Realtor group, said higher interest rates dampened sales but price softening is good news for the housing market because it is drawing buyers. "Many potential home buyers have been on the sidelines, some 'kicking the tires,' but mostly waiting for sellers to compromise on prices and terms," he said. "Now sellers in many areas of the country are pricing to reflect current market realities. As a result, there could be some lift to home sales, but it'll likely take some months for price appreciation to rise."

Most sellers continue to see excellent returns on their homes, according to Thomas M. Stevens, president of the National Association of Realtors. "Considering that typical sellers have been in their home for six years, the average appreciation during that time is close to 60 percent," said Stevens. "This demonstrates the value of housing as a long-term investment--the longer you own, the better your return."

According to Mark Burns, Coldwell Banker Realtor and president-elect of the Silicon Valley Association of Realtors, market conditions are becoming more reasonable, especially for buyers. Burns said, "Buyers now don't have to compete with 10 to 20 offers. They will be able to negotiate a reasonable market price for a home without having to pay a premium to eliminate the other bidders."

The national median existing-home price for all housing types was $230,000 in July, up 0.9 percent from last year, when the median was $228,000. Single-family home sales dropped 5 percent in July from the previous month, and were 11.4 percent below in July 2005 level. The median existing single-family home price was $231,200 in July, up 1.5 percent from a year earlier. Condominium sales rose 2.8 percent in July and the median condo price was $225,600, down 1 percent from a year ago.

As home sales around the country dropped, home prices dipped slightly in all regions of the country, except the South. Home sales in the South slipped 1.2 percent, but the median home price was $192,000, up 3.2 percent from the previous year. Existing-home sales in the Northeast dropped 5.4 percent and the median price dipped 2.1 percent to $276,000. Home sales in the Midwest fell 5.9 percent in July and the median price was $178,000, which is 0.6 percent below a year ago. In the West, home sales dropped 6.4 percent and the median price off $348,000, off 0.3 percent.

Statewide, the California Association of Realtors reported July sales of existing, single-family homes dropped 29.9 percent from the same month last year, and dipped 6.1 percent compared to the previous month. Some areas of the state experienced deeper sales declines--the counties of Riverside and San Bernardino had a 42 percent drop in sales and the Santa Clara region reported a 31.3 percent decline.

Despite slower sales, prices in many part of the state still continued to climb from year-ago levels. In July, the median sales price of an existing California home was $567,360, up 5.1 percent from a year ago. July statewide median sales price declined 1.5 percent from June's results.

According to DataQuick Information Systems, the median home price in Santa Clara County was $690,000 in July 2006, up 6 percent from $650,750 the prior year. Morgan Hill saw the highest appreciation as the median price increased to $918,000, up 33 percent from a year ago. Cupertino came in second, as the median home price increased 14.2 percent, from $875,000 in July 2005, to $999,000 the same time this year. The median home price in Los Gatos was at $1,030,000, up 11.4 percent from July 2005.

"Today's market is slowing as sellers maintain often unrealistic pricing expectations and buyers have more properties to choose from," said the state Realtor group's president, Vince Malta. "In addition, unlike the slowdown we experienced in the 1990s, homeowners today are not under duress to sell due to job losses. The urgency that characterized the market for the last few years is now gone for all but well-priced properties.

"With inventory levels double that of a year ago, annual price appreciation for the state slowed from the double-digit rates we experienced throughout all of last year to single digits this year," he said. "And in some regions of the state prices are down from a year ago. However, with a 7.5-month supply of homes for sale in July, we're far below the peak of February 1991, when there was an 18-month supply on the market."

"Many markets in California are mirroring other major metropolitan areas of the nation--a return to a more sustainable and balanced housing market compared to the frenetic pace of the past several years," said the state Realtor association's chief economist, Leslie Appleton-Young. "We've known that double-digit appreciation would eventually change when the underlying fundamentals change, which has been the case with expanded supply and rising interest rates. Affordability concerns prompted by higher prices and interest rate increases also are constraining sales. The monthly home payment has increased by 20 percent for many households in the state compared with last year."