Real Estate - State and Local

California's San Francisco Bay Area still has some of the highest-and-still-rising home prices in the nation, but those high prices are weighing down sales.

The nine-county area's total home sales -- new and resale condo and single-family homes -- plummeted by more than 25 percent in April compared to a year ago and 14.2 percent in just one month from March to April this year, according to La Jolla, CA-based DataQuick Information Systems.

Dataquick says the 8,358 sales in April was the lowest in five years as prices continued to rise, albeit not at the breakneck pace of years gone by. In April, year-over-year prices jumped only 7.2 percent.

DataQuick's data includes resale and new homes. New homes typically come with premium prices that tend to boost median prices overall.

Data sources for closed sales on resale homes only actually show price deflation in at least one county, San Mateo.

In San Mateo County, just north of Silicon Valley (Santa Clara County) prices slid from a record median of $922,000 in April 2005 to $900,000 this April, according to Richard Calhoun, broker/owner of Creekside Realty in San Jose and publisher of the Bay Area Real Estate Market Newsletter. Calhoun's report is comprised of statistics from the area's multiple listing service, R.E. InfoLink of Campbell, CA.

DataQuick shows San Mateo County home prices moving up at the slowest rate in the Bay Area, 2.6 percent in the past year to $750,000 -- for all homes. The median home price in the city and county of San Francisco rose only 3.6 percent to $778,000 in April.

In Santa Clara County, where the resale-only median hit a record $775,000 in April, according to Calhoun, DataQuick's numbers for all homes show a 6.8 percent increase in home prices, bringing the April median for all types of housing in the county to $661,000 -- for all homes.

The higher rate of home price inflation in Santa Clara County compared to San Mateo and San Francisco is due in part to a greater level of new home building activity.

The median price for the entire nine-county San Francisco Bay Area was $628,000, up 7.2 percent from a year ago, but sales fell 25.1 percent, DataQuick reported.

From April 2005 to April 2006, sales fell most in Napa County, down 39 percent, followed by Solano County, down 35.7 percent; Marin County, down 33.3 percent and San Francisco County, down 27 percent.

But even as sales fell, prices stubbornly continued to rise by 16.6 percent to $477,000 in Solano County; 8.3 percent to $844,000 in Marin County and 7.5 percent to $570,000 in Contra Costa County, for example.

Many California markets are revealing similarly contradictory price increase-sales decline behavior. It has experts scratching their heads.

"These are strange times for forecasters and analysts. Are we heading into a market lull? Or are we seeing the beginning of a significant downturn? Many of the fundamentals for housing are at a crossroads: Inflation, interest rates, demand, household incomes, prices, and whether homes are a good investment compared to other investments. Summer is going to be interesting to say the least," said Marshall Prentice, DataQuick president.

Other market experts would beg to differ, but DataQuick says indicators of market distress are still largely absent. The use of adjustable-rate mortgages has decreased in the last four months. Foreclosure rates are coming up from last year's low point, but are still below normal levels. Down payment sizes are stable and there have been no significant shifts in market mix, DataQuick reported.

However, higher interest rates and tougher underwriting is giving some consumers second thoughts.

Mortgage applications approved with a minimum of underwriting -- on so called "slam-dunk" loans -- accounted for 83.3 percent of mortgages originated in California during the April, 2005 to September, 2005 period. That percentage fell to 80.6 percent during the more recent period of October, 2005 to March, 2006, according to HomeSmartReports.com in San Juan Capistrano, CA.

"These ('slam-dunk' loans) are the home loans that lending institutions are comfortable making because the collateral for the loan, the home itself, is considered to have a relatively secure value," said Mike Ela, president of HomeSmartReports.

Ela said as long as home prices rise and sales fall, underwriting will continue to tighten.

"That is going to happen for a period of time because lenders don't want to get caught over lending at the peak of the market. They are assessing their risk," Ela added.

DataQuick says the typical monthly mortgage payment that Bay Area buyers committed themselves to paying was a whopping $3,048 in April -- up from $2,958 in March, and up from $2,659 for April a year ago.

Adjusted for inflation, mortgage payments are 20 percent higher than they were at the peak of the prior cycle sixteen years ago, DataQuick reported.

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