STATE OF THE CALIFORNIA HOUSING MARKET 2007-2008 - Survey
After a disappointing 2006, the housing market seemed to have stabilized in
early 2007, with sales of existing detached homes holding steady at around
450,000 homes and the median price staying near $560,000. In the spring,
however, tighter underwriting standards drove sales below 400,000 units,
mostly at the expense of homes below $1 million. However, because the
market above $1 million was not affected as severely, the statewide median
price held steady, with slight year-to-year gains. By mid-year, even that
segment of the market was choked off by the adverse effects of the global
liquidity crunch that had a more pronounced impact on homes over $500,000,
which relied on jumbo loans.
This year's State of the California Housing Market report examines these
and other developments in real estate over the past year, places recent
events into a historical context, and looks ahead to 2008. The annual
report also provides detailed statistics on consumer demographics, data on
home buying and selling behaviors, analyses on current housing market
conditions, and insights on the direction of the market.
Homes stayed on the market longer as the market shifted in favor of
buyers. The median time on market was 8.6 weeks in 2007, as compared
to the record low of 1.6 weeks in 2004. Time on market last rose to these
levels in the mid-1990s, when time on market hit 11 weeks in1995.
With homes staying on the market longer, the sales price to list price
ratio also widened. The median price discount in 2007 was 4.3
percent, significantly higher than zero percent in 2004 and 2005. It
was the highest since 1995 when the median price discount was 5.7 percent.
The median net cash gain fell for the second year from $202,000 to
$180,000, after it peaked in 2005. The number of sellers who sold
their home with a loss increased sharply from 1.9 percent in 2006 to 11.9
percent in 2007, the highest since 1997 when 12.5 percent of sellers had
net cash loss from their home sales.
The share of first-time buyers increased from 27.1 percent in 2006 to 30.4
percent in 2007, but was still considerably below the long-run average of
38.4 percent due primarily to affordability constraints.
The percent of first-time buyers with zero down payment dropped from the
record level of 40.3 percent in 2006 to 29.4 percent in 2007, while repeat
buyers adjusted slightly downward from 11.3 percent in 2006 to 10.2 percent
As home prices in California increased more rapidly than loan limit in
recent years, more home buyers needed to borrow above the conforming loan
limit. In 2007, nearly half of all new first mortgages were jumbo
loans, more than double the share in 2001.
With the spread between fixed and adjustable rate mortgages shrinking, home
buyers opted out of adjustable-rate mortgage (ARM) in favor of fixed-rate
mortgages (FRM) in recent years. The share of adjustable rate and
hybrid loans among all new first mortgages decreased from 32.6 percent in
2006 to 20.2 percent in 2007, while the share of fixed rate loans surged
from 60.2 percent in 2006 to 74 percent in 2007.
The liquidity crunch not only lowered the number of home buyers who could
be eligible for a more favorable loan product, but it also affected those
who needed a second mortgage. The use of second mortgage decreased
considerably from the recent high reached in 2006. The share of home
buyers who had a second mortgage dropped sharply from 43.4 percent to 32.7
To order or to obtain more information on the State of the California
Housing Market 2007-2008 report, please contact your local Association, or
contact our customer service department at 213.739.8227 or go to