California Median Pushes into $500,000 Territory

The median price of a detached single family home in California moved past the $500,000 threshold in April and sales advanced at a near record pace, as the market moved into the peak season for 2005. For the first time ever, the median price surpassed $500,000, reaching $509,230 in April. The median rose 2.6 percent over the March median of $496,550, and 12.5 percent over the April 2004 median of $496,550. While the year-to-year percentage increase was the smallest in just over 2 years, this was due in part to the surge in home prices a year ago when the median rose by 25 percent.The market advanced at the second highest monthly pace on record with 658,060 units, a 2.7 percent year-to-year increase over April 2004 figure of 640,710 units. Year-to-date sales were ahead of last year by 5.1 percent. The market has been driven since the start of the year by low interest rates, improved inventories, and strengthening economic conditions statewide. Despite a brief interval in late March and early April when the fixed rate exceeded 6 percent, the fixed rate remained in the 5.75 to 6.00 percent range, while the 1-year ARM ranged from 4.10 to 4.25 percent.At the same time, inventory levels were roughly double the record-low levels of a year ago, offering buyers and sellers alike more wiggle room in the market. Still, inventories were well below the long-run average of 6.5 months, and continued to drive price appreciation, which has been well in excess of the 7.5 percent long-run average for most of the past three years.In addition to favorable market conditions, statewide economic conditions have improved over last year. Year-to-year nonfarm job gains of 1.5 to 1.75 percent have been consistent since October of last year, while the unemployment rate in California has fallen faster than the US rate. The growth of nonfarm jobs may not be as spectacular as in the late 1990s and first part of the decade here in California, but there has been considerable improvement over the job losses of 2002 and 2003 and the anemic growth rates of early 2004.With the recent advances in the median price, housing affordability has drawn ever closer to its all-time low. The C.A.R. Housing Affordability Index, which measures the percentage of households that can afford to buy the median priced home, fell to 17 percent in April after hovering around 19 percent since May of last year. While the Index is unlikely to hit the record low of 14 percent that was set in the summer of 1989, low affordability readings for the state and many of its regions have reinforced ongoing concerns about the difficulty first-time buyers have had in getting into the market.