Higher prices slower sales

Although home sales have declined over last year, California home prices continue to climb. What’s up with that?

The median price of an existing single-family home in California increased 1.6 percent in August and sales decreased 30.1 percent compared with the same period a year ago, C.A.R. recently reported. "We experienced the greatest year-to-year sales decline last month since August 1982, when sales fell 30.4 percent," said C.A.R. President Vince Malta. "This is another indication that we're in the initial stages of a long-anticipated adjustment in the market."

According to the report, the median price of an existing, single-family detached home in California during August 2006 was $576,360, a 1.6 percent increase over the revised $567,320 median for August 2005. Also in August, closed escrow sales of existing, single-family detached homes in California totaled 442,150 at a seasonally adjusted annualized rate, down 30.1 percent compared with the sales pace recorded one year earlier and down 2.6 percent from home resale activity in July.

"Although the median price in the state and in several regions hit an all-time record in August, we expect softer prices toward the end of the year," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "The median price typically peaks somewhere between June and August before declining toward the end of the year. Some areas of the state (Sacramento and Placer County) already have experienced year-to-year declines for more than two months. This is in stark contrast to the past several years when there were constant double-digit increases. The long-term trend remains to be seen."