Sales of existing single-family homes fell 23 percent during 2006 in California, according to a report released late Tuesday by the California Association of Realtors. The survey, which examined trends in buyer and seller behavior during 2006, found that nearly 43 percent of borrowers in 2006 used a second mortgage to finance their purchases, more than triple the amount reported in 2001 and the highest percentage since 1982. â€œHome buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006,â€? said CAR vice president and chief economist Leslie Appleton-Young. â€œTwo out of five first-time buyers made a zero-down payment on their home purchase, while just one in 10 repeat buyers purchased their home with no down payment. Home sales in California finally fell in 2006 after four years of historic expansion, according to the CAR. Sales in the California Bay Area regional housing market fell at a slightly lower rate than for the state as a whole; after peaking in 2004, Bay Area sales declined 10 percent in 2005 and then 19 percent in 2006.
The median price in the Bay Area — the highest of any region in the state — continued to increase by small single-digit increments throughout 2006, in part because of inventories that were well below the statewide levels, the CAR said. Home sales in the Southern California region followed the general direction of the state during 2006, declining 23 percent from the record level of 2005. Inventory levels in this part of the state skyrocketed during the year, nearly tripling the amount from a year ago, to levels in the range of their long-run average. Not surprisingly, the Central Valley region had the largest decline in sales activity among the three primary regions in California. â€œThe statewide median price saw shrinking gains throughout the year, slowing from a 14 percent year-to-year increase in January 2006 to just under 2 percent as the year drew to a close,â€? said CAR president Colleen Badagliacco. â€œThat’s a far cry from the string of double-digit annual percentage gains that prevailed during the first half of this decade.” â€œOver the period 2003 through 2005, inventories were lean, multiple offers were common, and buyers and sellers alike knew they needed to move quickly to consummate a transaction,â€? she said. â€œBut as the market began to slow in late 2005, buyers sensed that they would get a better deal if they waited, while sellers still hoped to sell their home at a premium. This drove a wedge between buyer psychology and seller psychology, creating more market friction and leading to a slowdown in activity.â€? According to the study, more California home buyers used 100 percent financing to purchase their home during 2006. About a fifth of all homes purchased, 21.1 percent, were financed with a zero-down payment mortgage, compared with 19.7 percent last year. The number stood at just 4.5 percent of borrowers as recently as 2001. Other findings of the CAR study included:
- Two of five first-time buyers (40.9 percent) made a zero-down payment on their home purchase, while just one in 10 repeat buyers (11.3 percent) purchased their home with no down payment.
- The typical first-time buyer had a median age of 35, earned an annual household income of $80,000, and purchased a home with a historically high median price of $450,000.
- The typical repeat buyer had a median age of 45, earned an annual household income of $120,000, and purchased a home with a historically high median price of $618,000.
- After peaking in 2005 at $220,643, the median net cash gain by sellers from all home sales declined 8.4 percent to $202,000. It was the first time since 1997 that the median net cash gain fell. The median net cash gain for single-family detached homes increased 1.6 percent to $250,000, while the median net cash gain for condo/town homes declined 2.7 percent to $180,000.
For more information, visit http://www.car.org.