Friday, March 18, 2005

High rates, prices make owning a home out of reach for most in San Joaquin County

By Malcolm Maclachlan

Seemingly in defiance of economic laws, both interest rates and housing prices are going up in Northern California.

But some economists warn that home values could finally be leveling off.

On Thursday, mortgage company Freddie Mac issued a report noting that interest rates have hit a seven-month high. The current rate of 5.95 percent for a 30-year fixed rate mortgage represents a major increase from 5.57 percent just five weeks ago.

This comes in the wake of two reports showing that Northern California housing prices continue to go up. DataQuick Information Systems, a San Diego-area real estate research firm, said Thursday that Bay Area home prices had hit an all-time high, increasing almost 20 percent in the last year and 2.3 percent in the last month alone.

Last week, the California Association of Realtors issued a report saying that home prices are now beyond the reach of most California residents.

According to their figures, only 17 percent of San Joaquin County residents will be able to afford a median price house in the county. This is down from 30 percent only one year ago.

Frank Nohaft, vice president and chief economist at Freddie Mac, said it is important to note that interest rates are constantly being updated, while home sale price figures are usually a month or two old.

In other words, he said, higher interest rates may well soon make themselves felt in flattening housing prices.

"Don't assume that house values are going to keep going up double digits every year," Nohaft said. "I don't expect a crash. But appreciation rates can't be sustained at that level."

Buyers should plan for appreciation rates to be closer to the historical U.S. average of about five percent a year, Nohaft said. He added that San Joaquin housing prices have been inflated by huge gains in nearby large cities.

According to Freddie Mac's figures, San Francisco median home sale prices have gone up 63 percent over five years and 13 percent in the last year alone. In San Jose, the increases were 56 percent and 11 percent for the same periods.

Local gains have been even more dramatic. According to Grace Alvarez, a real estate agent based in Tracy, the median price of a home in Tracy rose almost 40 percent in the last year. That price was $355,500 in January of 2004, but hit an eye-popping $495,000 in January of this year.

"It's definitely a seller's market," Alvarez said.

Tracy-based real estate agent Glen Willbanks said some of the same characteristics that have driven up local housing prices will also serve to shield them against any crash based on interest rates. The area has a combination of high demand, extensive regulation, an inadequate supply of affordable housing and a prevalence of anti-growth activism.

Willbanks started selling real estate in Tracy in 1982, in the midst of 16 percent interest rates and a housing price crash. At the time, he said, people we looking at 10 percent down payments and monthly mortgage costs of $1,600, considered prohibitively high at the time.

But buyers who braved those conditions eventually saw a major payoff, in the form house values that multiplied five or six times over 20 years. Today's buyers could see similar benefits, he said, if they think long term.

"There is always going to be a housing shortage in California," he said.


At 11:20 PM, Anonymous Anonymous said...

Who wrote this crap? I hope they are out of a job now... crook...


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