DAYS ON THE MARKET
By JODI SUMMERS
It was predicted a year ago that California real estate prices would level out in 2004, but that wasn’t the case — the average home price in the Los Angeles area saw at least a 23 percent increase.
“The median price of a home in California continued its upward march, increasing by double digits for the 36th month in a row to $473,260,” declared Jim Hamilton, president of the California Association of Realtors (CAR).
In Santa Monica, the average price of a single family home in 2004 was $1,350,000, as compared to $995,000 in 2003 and $853,000 in 2002, according to the Multiple Listing Service (MLS). Of the 328 homes that sold, it took an average of 37 days to sell the property.
In the condominium market, the MLS reports that in 2004 the average condo price in Santa Monica was $625,000, as compared to $465,000 in 2003 and $445,500 in 2002. Of the 664 condos that sold locally in 2004, the average time it took for a property to sell was 35 days.
“Consumer demand and the low mortgage interest rate environment are still driving the market,” said Leslie Appleton- Young, CAR’s vice president and chief economist. “Time on the market has trended up to 40 days, an indication that buyers are taking more time prior to making the purchase decision compared with the frenzied pace we witnessed most of this year.”
Short-term interest rates have been rising throughout 2004, but long-term rates in the mortgage market have remained below 6 percent, making home purchases more affordable. A second factor has been exceptional economic strength and employment growth in a number of major markets.
California — which is home to 1/9th of the people in the United States — has seen some impressive housing increases. Nationally, the housing market has followed suite. In the third quarter of 2004 across the country, prices rose by 13 percent from the same period in 2003. That rate surpasses all annual increases during the last 25 years, according to the Office of Federal Housing Enterprise Oversight (OFHEO), the agency that tracks home prices around the country. Additionally, OFHEO found that the average house in three dozen major metropolitan areas gained more than 20 percent in value.
In the 12-month period of the study, Las Vegas led the housing boom with home prices gaining a stunning 41.7 percent in value — the highest annual rate of housing inflation ever measured for a large metropolitan area in the United States. Las Vegas has seen large influxes of new residents and jobs during the last several years. On the East Coast, houses in the Washington, D.C. metropolitan area gained 24 percent in the 12-month period. Our nation’s capital also has experienced significant employment growth, thanks in part to higher federal spending. Miami and Fort Lauderdale homes rose by 23.5 percent on average.
Nevada’s home prices grew the most over the past year at 35.8 percent, according to the National Association of Realtor’s Homebuyer Income Gap Index. Hawaii came in second, with a statewide appreciation of 28.3 percent, followed by California at 27.2 percent; the District of Columbia at 23.9 percent and Rhode Island at 22.5 percent. The smallest increases occurred in Indiana, Utah and Texas.
Homes in some areas of Los Angeles and San Diego gained more than 30 percent. Calabasas saw the most impressive rise in Los Angeles County with a 59.5 percent increase, and in Inglewood home prices rose 53 percent.
“The house price gains lead to the natural question of whether these gains are sustainable,” said Amy Crews Cutts, Freddie Mac’s deputy chief economist. “Thus far, the annual growth rates are largely consistent with the market fundamentals of low interest rates, a lack of buildable land that restricts the amount of new supply hitting the market, and job growth. I am hesitant to use the word ‘bubble’ because the fundamentals are still strong, but it is hard to believe that these very large increases will continue. However, absent significant job losses in a region — like we saw in California in the early 1990s when Los Angeles and San Diego together saw more than 575,000 jobs disappear over a period of three and a half years — house prices should not see significant declines.”
Freddie Mac is a shareholder-owned corporation chartered by the federal government to maintain a constant flow of mortgage funds for the nation’s housing market.
This year’s continued growth of the housing market is fantastic news for home owners, but if you’ve yet to get into the California housing market, it continues to grow more difficult. CAR research has found that California households needed a stated income of $108,310 to purchase a median-priced home at $462,510 in the third quarter. The median income for the state was $52,940 in the third quarter. (For your real estate needs, , or call (310) 309-4219).
Originally published in the Santa Monica Daily Press print edition on January 5, 2005. Read the original PDF.