The California Association of REALTORS^® (C.A.R.) called 2004 a year "for the record books," with a projected record year for California home sales, the highest home prices ever recorded, and a double-digit increase in the price of the single-family home for the third consecutive year.

With one in nine Americans also calling themselves Californians, what happens there affects the nation.

Among the highlights reported by C.A.R.:

• 2004 will be a record year for home sales, which are projected to increase 3 percent over last year's record sales figure of 601,800 existing detached homes.

• 2004 will be a record year for home prices. The median price of a single-family home in California crossed the $400,000 threshold late in 2003, and will finish the year with an annual median in excess of $450,000, 22 percent higher than the 2003 annual median of $372,700.

• The percent increase in the median price of a single-family home increased by double-digits for the third consecutive year in 2004.

• C.A.R.'s Unsold Inventory Index reached a historic monthly low of 1.5 months in April 2004. Time on the market -- the median number of days it takes to sell a single-family home -- was the third lowest on record at a projected annual average of 29 days, surpassed only by 2003 at 27 days and 2002's all-time low of 26 days.

• C.A.R.'s Housing Affordability Index (HAI) fell to 19 percent in May, the first time the index has hit the teens since December 1989. Since that time, rapid price appreciation and marginally lower interest rates have generally offset each other, keeping the HAI in the 18- to 19-percent range throughout the summer and fall of this year. If not for unexpectedly low interest rates throughout much of the year, price appreciation might have driven the HAI to historically low levels that were last seen in May/June 1989 (14 percent).

• The affordability gap between California and the U.S. reached an all-time annual high of 36 percent in 2004. Nationally, affordability was at 56 percent in 2004, four points below its record high.

• New home building eclipsed the 200,000 mark in 2004 for the first time in more than a decade, with an expected total of 206,000 permits for the year. The last time the state exceeded 200,000 permits was in 1989, when 238,000 permits were issued. Yet this year's permit total fell short of household growth, which is estimated at between 220,000 and 250,000 households in 2004.

• First-time homebuyers as a share of the total market fell to an all-time low of 26 percent in 2004, based on C.A.R.'s annual Housing Market Survey.

• The Boomer Generation exerted a tremendous influence on the California housing market in 2004, accounting for three out of four transactions.

• Internet use by homebuyers and sellers continued to climb in 2004. Based on C.A.R.'s Internet Versus Traditional Buyers Survey, 56 percent of all buyers used the Internet in a substantive way as a part of their homebuying process, surpassing the 50 percent mark for the first time.

• Forty-seven percent of homesellers indicated that they had used the Internet in the homeselling-process, a dramatic increase from 12 percent in 2003, according to C.A.R.'s Survey of California Home Sellers.

• Fannie Mae and Freddie Mac increased the single-family conforming mortgage loan limit from $333,700 this year to $359,650 in 2005, which could benefit more than 12,960 families in California. However, the increase in the loan limit is still far too low to benefit most homebuyers in California, as the median price of a home in California is 28 percent higher than the new loan limits.

According to the CAR's "2005 Housing Market Forecast," the median home price in California will increase 15 percent to $522,930 in 2005 compared with a projected median of $454,720 this year, while sales for 2005 are projected to reach 603,700 units, falling 2.5 percent compared with 2004. The double-digit gain in the median price of a home will again be fueled by the continuing shortage of housing across much of the state, according to C.A.R. economists like Leslie Appleton-Young.

"We expect the economy in 2005 to generate modest growth in jobs both nationally and here in California, while productivity gains and competition will likely keep inflation in check next year," said Appleton-Young in October, 2004. "While the increase in interest rates will be enough to moderate the pace of home sales in 2005, population and household growth will continue to put pressure on home prices, resulting in greater price appreciation in California compared with the nation."

Published: January 7, 2005

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