California Market Report 

California Market Analysis 

Although the national economy continues to struggle in several areas, the California real estate market gives strong signs of recovery. In the last twelve months the median price of homes in California has risen 13.6% from $274,640 to $311,950. Does this mean that home values are appreciating? Well, the answer is not so simple. While the median price of homes may be a distant relative of appreciation, it is not directly related. The median price of homes is obtained by determining the price point at which an equal number of buyers are buying above and below that price. For example: if 5 million homes sell in California in 2010 and the median price is $274,640, that means half of the sales were below $274,640 and half of the sales were above $274,640. In other words, the median price is the middle price-not to be confused with the average price.

So what has caused the median price to increase by 13.6%? The increase in median price can be attributed to two main factors. First, interest rates are 1.25% lower this year compared to a year ago. Therefore buyers can afford to pay more for a home and still have the same monthly payment as they did one year ago. In addition, because of the high demand for homes below $500,000, homes in this price range have appreciated over the last twelve months. This combination of lower interest rates and slight appreciation in the under $500,000 market has created an increase in the median price. Low rates and low prices make this an ideal time to buy.