Affordability, low interest rates, tax credits, and higher conforming loan rates are combining to boost sales in California, far above last year's sales.

That could bode well for the rest of the nation if the saying, "as goes California, so goes the nation," rings true.

Statewide, home prices in May were down an average 32 percent for houses and condos combined, according to the latest numbers from the California Association of Realtors (CAR).

"There's a lot of activity in the low end right now, but with the conforming loan limit at $729,750 the $600,000 to $800,000 price range has really picked up too," said Kim DiBenedetto, association president and a real estate agent with Coldwell Banker Del Monte Realty in Carmel, CA

CAR's "First Time Buyer Housing Affordability Index" for the Monterey region was up to 71 percent during the first quarter of 2009, compared to 31 percent a year earlier.

Statewide, the numbers were 69 percent during the first quarter this year and 46 percent a year ago.

The index measures the percentage of households that can afford to purchase an entry-level home.

DiBenedetto said there should be more activity in the lower end, but banks are holding foreclosures due to industry mergers and a legally mandated moratorium.

That's true for most of the state.

A 90-day foreclosure moratorium, effective June 15, 2009, is designed to get lenders to try harder to keep borrowers in their homes. Under the new law, loan companies have to prove they tried to modify loans of struggling homeowners before they can begin foreclosing. Otherwise, lenders must give homeowners a three-month reprieve before they begin foreclosure.

Interest rates have become more cooperative, trending lower during the first weeks in July. Freddie Mac reported July 16, the average rate was 5.14 percent on conforming, 30-year fixed rate mortgages.

"We don't know how long they can stay this low. One tick up and you can be priced out of the market," DiBenedetto said.

DiBenedetto said buyers include first-timers cashing in on tax credits, a maximum $10,000 for the state and $8,000 from the federal government.

By mid-July, California still had $33 million of $100 million to allocate for first time home buyers who purchase new homes. Unfortunately the $100 million may already be spoken for. The state had also received applications for more than the $100 million in the fund.

The federal government offers a maximum $8,000 tax credit to first time home buyers who purchase any resale or new home.

CAR said the share of first-time buyers statewide is up to 38 percent this year, compared to only 19 percent last year.

"Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates, and first-time home buyer tax credits, may not align again for many years," said CAR President James Liptak.

CAR's "2009 Survey of California Home Buyers" said 68 percent of buyers said price decreases motivated them to buy a home, while 39 percent reported low interest rates helped them move to a better location. Twenty-three percent claimed the likelihood that rates will move up as another motivating factor to buy.

The survey also found the large number of distressed properties on the market was more of a motivating factor than in recent years.

Forty-nine percent of all buyers purchased a home through a traditional market sale, while 38 percent purchased a bank-owned property. However, buyers found REO or bank-owned property purchases were more difficult in terms of obtaining financing, compared with a more traditional transaction.

DiBenedetto also said investors are a growing segment of buyers now that home prices are low enough to make purchases viable cash-flow rental properties.

"I would tell buyers it's a good time to buy," said DiBenedetto.

Published: August 13, 2009

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.