By Kelly Zito Home prices in San Francisco, Marin and Santa Clara counties last month fell below their levels of a year ago as the lingering high-tech slump appeared to take the starch out of the housing market. For the first time since March 2002, median home prices for single-family houses declined year-over-year in three of the highest-priced Bay Area counties. The number of homes sold in the region also slipped last month. "The job situation in the Bay Area is a disaster, and what that's done is taken the number of people chasing homes down," said Raphael Bostic, director of the Casden Real Estate Economics Forecast at the University of Southern California. The median price of a single-family home in the nine-county Bay Area was $446,000 in May, up 1.6 percent from $439,000 in May 2002, DataQuick, a La Jolla real estate research firm, reported Thursday. Much of the increase rested on price gains in more moderately priced counties such as Solano and Sonoma counties. But despite historically low interest rates, median prices for detached homes decreased in San Francisco, Santa Clara and Marin counties by 2.5 percent, 3.9 percent and 1.5 percent, respectively. Reflecting a trend that began several months ago, the number of homes and condominiums sold in the Bay Area also slid year-over-year. In May, 10,603 sales were tallied, down 5.7 percent from 11,238 in May 2002, the report said. The region's median -- a combination of single-family home and condo prices -- was a record $427,000, a 3.4 percent rise. The median is the midpoint; half of home sales were above, and half were below. HOUSING SECTOR SUCCUMBS. As in much of the United States, surging home prices and sales in the Bay Area have provided a crutch for the stumbling economy, aided in large part by a constrained housing supply, low interest rates and an influx of immigrants. But with the loss of nearly 300,000 jobs in the San Jose and San Francisco areas in the last two years, experts say the housing sector may have succumbed to the economic malaise. Ken Rosen, a real estate and economics professor at UC Berkeley, estimates 50,000 people have the left the Bay Area, unable to find jobs. "It's been a bit of a disconnect in the Bay Area with (home) prices rising and the loss of jobs," Rosen said. "This the first sign of something that's been going on for 9 months." A 2-point rise in interest rates could dampen sales and prices further, Rosen said. LESS SPECULATION But few experts foresee mortgage rates increasing substantially or prices eroding dramatically. For one, home builders have become more savvy about home construction in the last decade. Whereas a glut of housing in the early 1990s led home prices to nose dive in California when the economy collapsed, builders today conduct more in-depth market research and build few developments based on speculation. "Housing is built on a lot of strong fundamentals, so theories about a crash need to be evaluated closely," Bill Apgar, senior scholar at the Joint Center for Housing Studies at Harvard University, said Thursday at a building conference in San Francisco. Continued migration to California -- both domestic and international -- also is expected to buoy housing demand. Take Todd Yates. Yates, who just landed a business development job with outdoor apparel maker North Face of San Leandro, purchased a $900,000 home in Danville on Thursday. On Monday, Yates and his wife, Anne, sold their 40-acre horse farm in Williamsport, Penn. "The climate and environment and amount of things to do are worth moving from Pennsylvania to California," Yates said. Regarding the debate over home prices, Yates said, "It's something I honestly can't worry about. You hope in the long term it goes up. But it's where you live and work -- you have to buy a house." Rock bottom interest rates have helped home buyers maintain or lower their monthly mortgage payments, despite purchasing pricier homes. The typical monthly mortgage payment that Bay Area buyers committed themselves to paying in May was $1,839, compared with $2,076 a year ago. The peak was in May 2000 at $2,124. FEWER HIGH-END SALES The single-family home price dips in May are more a function of a shift in the mix of sales, said DataQuick researcher John Karevoll, noting that fewer sales are occurring at the luxury end of the market. This pushes the median price down. "We're just not seeing big (price) declines in the Bay Area right now, just more of a sales slowdown," Karevoll said. Indeed, home prices in some sections of San Francisco have jumped 3 to 7 percent, according to Prudential Real Estate sales manager Jim Hedges. "Prices have definitely moderated, but we have a flood of buyers," Hedges said. However, sales figures don't tell the whole story, said Richard Calhoun, owner of Creekside Realty in San Jose. For instance, there are about 3,400 single family homes on the Multiple Listing Service in Santa Clara County, compared with roughly 2,800 at this time last year. "The market should be on fire right now because buyers want to take advantage of the low interest rates," Calhoun said. "But you have a lot of sellers who are trying to sell and can't because of economic conditions."
June 20, 2003