The California Association of Realtors is considering 2004 a record year for California home sales with the highest prices ever recorded and a double-digit increase in the price of single-family homes, occurring for the third consecutive year. Because one in nine Americans is a Californian, this massive inflation affects the entire country. Median home prices have risen 22 percent since the end of 2003, with a current median home price reaching above $450,000. Homes in mid 2004 were staying on the market at a low average of 45 days, only surpassed by 2002’s all-time low of 26 days.
At rates surpassed since the 1990s, over 200,000 homes were permitted for building in 2004, creating more housing and a larger market for home-buyers. This rapid rate of growth has brought more home owners to the state and, in turn, has created more demand for property, not to mention the high rate of Californians (over 90% who move within the state.)
Three out of four transactions were made by the Baby Boomer generation, a group who is still working, earning more money and buying second homes. This age group is expected to continue purchasing four the next eight to ten years. Over 50 percent of home buyers are using the internet as their primary means of researching new homes, up from 12 percent in 2003, but most of this group is still finding the use of a licensed agent beneficial in their eventual transaction process.
Fannie Mae and Freddie Mac increased the single-family conforming motgage loan limit from $333,700 this year to $359,650 in 2005, which could benefit more than 12,960 families in California. But because median home prices in Californial are 28 percent higher than these new loan limits, many homebuyers will not benefit from this adjustment. According to the California Association of Realtors “2005 Housing Market Forecast,” the median home price in California will increase 15 percent to $522,930 but the number of home sales are expected to drop 2.5 percent, clearly showing that the rise in cost is affecting the number of home sales, along with a growing shortage of housing supply. Because job growth and population are expected to elevate, the pressure on home prices will still prove very competitive in the new year.
