The Contra Costa Times, Contra Costa County’s major newspaper, is reporting today that Higher Bay Area home sales, prices offer hope. It is important to notice the first paragraph of the article.
The Bay Area real estate market continued to show improvement in November due to fewer sales of bargain-priced foreclosed homes and more sales of higher-priced properties.
According to a report released Thursday by MDA DataQuick of San Diego, the median price paid for a home in November was $387,000, an 0.8 percent decrease from October, but up 10.6 percent from November 2008. Last month’s median price was the second consecutive month that saw home prices rise on a year-to-year basis since two years ago. The median is the point at which half of the homes sell for more and half sell for less. [emphasis mine]
The author, Eve Mitchell, astutely notices the reason the median home price, the price at which half of the sales were above and half of the sales were below, rose is due to more high-priced homes selling.
This doesn’t mean housing prices are actually rising, though they could be. It does mean a greater number of homes above the median price have sold in November than in November of 2008.
The article goes on to say,
In Contra Costa County, the median sales price for a home was $290,000 in November, a 9.4 percent gain from a year ago.
“We are really starting to see the high-end loosen up. Obviously, the borrowers have to be well qualified, but we are starting to see more financing.” said Robin Dickson, executive vice president of J. Rockcliff Realtors, an East Bay brokerage.
Another reason that median prices are up from a year ago is that there are fewer short sales and bank-owned foreclosure in the marketplace now, she said.
Still, she would not be surprised to see more foreclosures come into the market next year.
“We know they are out there but the banks are hanging on to them for now,” Dickson said
Foreclosure Crisis Not Over
Mish in Tip of the Iceberg With Luxury Short Sales; Fannie, Citi Suspend Foreclosures for Holiday Season, links to a Bloomberg article that states,

House
Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate and some are turning to so-called short sales to unload properties as stock-market losses and pay cuts squeeze wealthy borrowers.
If this trend of luxury home defaults continues, expect to see more luxury real estate return to the market as bank-owned REOs. This could continue to lower the median home price.
Bloomberg also reports ‘Shadow Inventory’ of U.S. Homes Climbs, Report Says. (HT: Calculated Risk)
The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.
Rising Interest Rates Leads to Lower Prices
According to the Chicago Sun-Times, Freddie Mac is reporting the 30-year mortgage rate is up to 4.94% from 4.81% last month. Lower interest rates allow buyers to afford more house, because their monthly payment is lower. If the interest rate continues to rise, home values may stay flat or fall as borrowers will find it difficult to qualify for higher priced homes.
Conclusion: Prices Not Likely to Rise
While news of a greater number of higher-priced homes selling is positive, it does not indicate that the value of homes is actually rising. As well, with a looming “shadow inventory” and the specter of higher interest rates in the future home prices are not likely to rise in the near future.
(Photo Credit: Modern Northwest House by pnwra)