California Housing Market Saw “Transition Year” in 2006

According to the San Bernardino Sun, you can call it a transition year.

After four years (2001-2005) of impressive sales, strong California mortgage demand and runaway price appreciation, the housing market in the Golden State slowed appreciably in 2006.

So said the California Association of Realtors’ 26th annual Housing Market Survey, which was released Tuesday.

With prices still climbing and the chance for residents to qualify for home loans diminishing to record lows, 2006 was the year the Realtors actually dropped the method by which they had previously been calculating housing affordability.

The group switched to a housing affordability index for first-time buyers, figuring the lower level at which most first-timer buyers applied for mortgage loans and purchased homes would make a bad picture look better.

It worked only marginally.

A few facts the survey showed was that the typical first-time buyer was 35 years old, had a household income of $80,000 and applied for a home purchase loan for a property priced around $450,000.

The average first-time home buyers also didn’t make much of a down payment.

“Home buyers with zero-down payments increased significantly, up from 4.5 percent in 2000 to 21.1 percent in 2006,” said Leslie Appleton-Young, chief economist with CAR.

“Two out of five first-time buyers made no down payment.”

It will be interesting to see the direction taken by the California housing market in 2007. Will it be more of the same for struggling prospective home buyers, or will the market deflate even further?