Low Prices, Rate Expectations Seen Boosting California Purchases

Home purchase activity is at least temporarily on the rise in California, the state's Realtor association said, because of favorable prices, relatively low interest rates and consumer belief that rates will increase in the near future. According to the "2009 Survey of California Home Buyers," 68% of consumers said price declines were the motivating factor in their decision to purchase a home, while 39% said low interest rates helped them move to a better location. There were 23% who said a rate increase pushed them to buy recently. Nearly half of the sales were "traditional market sales," while 38% were real estate owned properties. Just 13% were short sale transactions. The survey also found that those buying REO had the highest level of difficulty in obtaining financing, 8.9 on a scale from 1-to-10; for traditional sales buyers it was 7.7 and for short sales buyers it was 7.6. Fixed-rate mortgages dominated in some cases, with 88% of traditional sales and 75% of short sales being financed with these loans. However, just 43% of those buying an REO property used an FRM. The California Association of Realtors survey said that financial literacy is a problem, especially among those going through the traditional sales process, with 32% saying they did not know or were not sure of their loan terms, compared with 12% of REO and 7% of short sale buyers stating the same thing. First-time buyers had an average downpayment of 19.7%, while repeat buyers put down an average of 28.3%.