Realty Times: Affordability Issues Push Buyers Into Condos, Says C.A.R. Survey

December 7, 2000

Affordability Issues Push Buyers Into Condos, Says C.A.R. Survey
by Realty Times Staff

One of the country's largest trade organizations, the California Association of REALTORS® has just released its 2000 California Housing Finance Survey (HFS.) with few surprises, except how such a dotcom rich state is managing to have affordability issues while the rest of the country is slowing down, and housing prices are starting to drop.

The affordability index is so low in California that buyers are looking to the condominium market as an affordable alternative to a single-family home, says the HFS.

"Higher home prices and affordability concerns increased the sales of smaller single-family detached homes and pushed some homebuyers, especially at the lower and moderate end of the market, into lower-priced condominium alternatives," said C.A.R. President Gary Thomas. "Overall, sellers have reaped the rewards of the robust real estate market, pocketing a median net cash gain of $80,000 -- up 23.1 percent compared to 1999."

The detailed study also reported that the median time on the market and the price discount remain at record low levels. The typical California home sold in 2000 was on the market for four weeks, half the eight-week period of three years ago and the shortest time on the market since 1989. In 1995, the median time on the market was 11.5 weeks.

"Throughout 2000, demand for residential real estate remained high, driving prices skyward and keeping inventory low," said Leslie Appleton-Young, C.A.R.'s vice president and chief economist. "One indicator of the underlying strength of the residential real estate market is the historically low median price discount on California homes.

"The price discount, representing the percentage difference between the initial asking price and the final sales price, was only 0.5 percent in 2000, down from 1.7 percent a year ago," she said.

Additional key findings of C.A.R.'s 2000 California Housing Finance Survey include:

During 2000, the median price of a home in California was $241,250, 8.7 percent above the 1999 median of $222,000. The 2000 median price was up 37.9 percent compared to 1995, when it was $175,000.

The stock market influenced buyers' and sellers' decisions to participate in the housing market 10.5 percent of the time, compared to 6.6 percent for the same period a year ago.

In 2000, 60.9 percent of California homebuyers were married, up from 58.6 percent in 1999; 30.8 percent were single, a slight increase from a year ago; and 7.2 percent were composed of two or more related or unrelated individuals, down from 9.7 percent last year.

California home purchases in 2000 were paid for entirely with cash 11.9 percent of the time, compared to 9.9 percent a year ago.

The proportion of first-time homebuyers dropped to 39 percent in 2000 compared to 42.4 percent a year earlier. This was the lowest market share of first-time homebuyers in the past 10 years.

Repeat homebuyers comprised 61 percent of the state's home purchasers in 2000, up from 57.6 percent in 1999.

The median mortgage interest rate on new fixed-rate mortgage transactions was 8.25 percent in 2000, compared to last year's 7.40 percent median.

Fixed-rate loans comprised 80.1 percent of new first mortgages issued in California in 2000, compared to 90.7 percent last year. Adjustable-rate loans comprised 14.0 percent of California's new mortgages in 2000, compared to 8.2 percent last year.

Mortgage bankers issued 58.3 percent of California's new first mortgages in 2000, nearly unchanged from 58.7 percent last year. Savings and loan institutions originated 19.5 percent of California's new home loans in 2000, compared to 15.7 percent in 1999. Commercial banks issued 15.4 percent of new home loans in California in 2000 compared to 13.1 percent last year.

First mortgages in California were FHA-insured or VA-guaranteed 18.7 percent of the time, compared to an 18.8 percent market share achieved by FHA/VA loans in 1999.

California buyers in 2000 purchased single-family detached homes 75.6 percent of the time. Attached homes (condominiums and townhouses) were bought by 16.7 percent of purchasers.

The median size of the typical home bought in California in 2000 was 1,574 square feet, compared to a median of 1,590 square feet in 1999. C.A.R.'s annual Housing Finance Survey was first conducted in 1981. The survey asks California REALTORS* about the financing, property characteristics and buyer/seller demographics of their most recent transaction. The position of REALTORS* in real estate transactions provides them with invaluable insight into the home purchase and sale transaction.

Copies of the 2000 Housing Finance Survey are available at a price of $35 for C.A.R. members and $150 for non-members. To order, call (213) 739-8227.

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