Explaining the Current Market to Consumers

GENERAL MARKET INFO

· The main constraint on market activity at this time is the lack of funds available for loans because of the credit crunch, which has been compounded by tighter underwriting standards.

· Historically, mortgage rates on jumbo loans are 0.2 percent to 0.4 percent higher than those on conforming loans, but the spreads since the onset of the credit crunch have been double or even triple that.

· The lack of available funds for loans, even for qualified buyers, has resulted in a dearth of buyers who can close on a home purchase.

· The time a home remained on the market prior to selling improved to 33.6 days in September 2009, compared with 46.2 days (revised) for the same period a year ago.

· In September 2009, it would have taken 4.2 months to sell all the homes on the market at the current sales rate, an improvement compared with a year ago, when it would have taken 6.5 months (revised).

· Successful passage in the U.S. Senate of the economic stimulus package approved by the U.S. House of Representatives should positively impact the market as buyers who previously would have to take out a jumbo loan will qualify for more affordable conforming loans, thanks to the proposal's plan to increase the conforming loan limit from $417,000 to as much as $729,750.

SALES ACTIVITY

· Sales continue to rise year-over-year, with sales in September increasing 2.1 percent in California, compared with the same period a year ago. Sales soared above the 500,000 unit threshold for the thirteenth consecutive month.

· Month-to-month sales increased slightly in September.  Sales in September 2009 increased 0.6 percent compared with the previous month.

HOME PRICES

· The statewide median price of an existing, single-family detached home in California was $296,090, a 7.3 percent decline from the revised $319,310 median for September 2008.

· The September 2009 median price increased 1.1 percent compared with August's revised $292,960 median price.

· Large decreases in the median also have been the result of a dramatic change in the mix of sales since the onset of the credit/liquidity crunch and the increase in the share of distressed sales. In August 2007--just prior to the beginning of the credit crunch -- the less than $500,000 price range accounted for 43 percent of sales, the middle segment ($500,000 to $1 million) made up about 42 percent, and the more than $1 million segment captured 15 percent of the market. The market share for the less than $500,000 range increased steadily from late 2007 throughout 2008 and reached a peak of 85 percent in January 2009. At the same time, the middle segment’s market share fell below 15 percent, while the high end market share fell to 3 percent. These market shares were 76, 19, and 5 percent, respectively, in September.

MORTGAGE RATES

· Interest rates continue to remain near their historic lows. Thirty-year, fixed-mortgage interest rates averaged 5.06percent during September 2009, compared with 6.04 percent in September 2008, according to Freddie Mac.

· Adjustable-mortgage interest rates averaged 4.59 percent in September 2009, compared with 5.14 percent in September 2008.