Home sales in the nine-county Bay Area declined last month to the lowest level in five years as price increases continued to ease back, according to DataQuick Information Systems.

The median price paid for a Bay Area home was $607,000 in December. That was down 0.3 percent from December's $609,000, and up 13.7 percent from $534,000 for January a year ago. The annual price increase was the lowest since prices rose 13.1 percent to $474,000 in March 2004.

All Homes	Num Sold Jan-05	Num Sold Jan-06	Pct. Chg	Median Jan-05	Median Jan-06	Pct. Chg
Alameda	1,503	1,259	-16.2%	$495K	$562K	13.5%
Contra Costa	1,394	1,197	-14.1%	$475K	$570K	20.0%
Marin	309	210	-32.0%	$740K	$741K	0.1%
Napa	164	103	-37.2%	$542K	$596K	10.0%
San Francisco	423	335	-20.8%	$684K	$722K	5.6%
San Mateo	550	450	-18.2%	$693K	$726K	4.8%
Santa Clara	1,862	1,486	-20.2%	$565K	$648K	14.7%
Source: DataQuick Information Systems, www.DQNews.com

 ¡°Normalized¡± Housing Market in 2006

The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors® (NAR).

David Lereah, NAR¡¯s chief economist, said current trends in the housing sector are healthy. ¡°We don¡¯t need to break a record every year for the housing market to be good ¨C in fact, cooling sales are necessary for the long-term health of this vital sector,¡± Lereah said. ¡°A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.¡±

After setting a fifth consecutive annual record, projected to 7.10 million units for 2005, existing-home sales are forecast to ease by 4.4 percent to 6.79 million this year, which would be the second highest on record. New-home sales, which should be a record 1.29 million for 2005, are expected to decline 6.0 percent to 1.21 million in 2006 ¨C that also would be the second best year in history. Total housing starts for 2005 are seen at 2.07 million units ¨C the highest since setting a record 1972 ¨C with a 6.6 percent slowing to 1.94 million this year.

¡°A lot of demand has been met over the last five years, and a modest rise in mortgage interest rates is causing some market cooling. Along with regulatory tightening on non-traditional mortgages, there will be fewer investors in the market this year,¡± Lereah said.

Silicon Valley, California 3 month Inventory
Including Alviso, Campbell, Cupertino, Fremont, Los Gatos, Milpitas, Morgan Hill, San Jose, Santa Clara, Saratoga, Sunnyvale
Trend	2/14/2006	1 month	2 month	3 month
Median Price	$695,000	2.80%	1.60%	0.90%
Inventory	3,522	9.10%	-5.00%	-19.90%
Date	Inventory	25th Percentile	50th Percentile	75th Percentile
			(Median)
2/14/2006	3,522	$555,950	$695,000	$915,000
2/7/2006	3,402	$550,000	$690,000	$899,900
2/1/2006	3,360	$550,000	$689,000	$899,000
1/28/2006	3,384	$555,000	$689,000	$899,000
1/21/2006	3,283	$550,000	$684,888	$893,950
1/14/2006	3,229	$549,000	$675,950	$879,500
1/7/2006	3,089	$549,000	$675,000	$885,000
1/1/2006	2,951	$549,000	$675,000	$885,000
12/28/2005	3,208	$559,000	$680,000	$899,000
12/21/2005	3,495	$559,950	$684,950	$898,888
12/14/2005	3,709	$560,000	$684,000	$890,000
12/7/2005	3,920	$566,950	$685,000	$895,000
12/1/2005	3,993	$569,950	$689,000	$889,888
11/28/2005	4,122	$569,888	$685,000	$883,888
11/21/2005	4,302	$569,900	$684,888	$880,000
11/14/2005	4,396	$574,950	$688,850	$889,888
The numbers provided here are asking prices derived from MLS listings, provided by housingtraker.

Rate Outlook

Rates will rise a bit due to some inflationary pressure, but not too bad. Keeping rates at good levels will be continued foreign demand and asset reallocation. Our bonds look pretty good to foreigners, who are offered lower returns in their home country. And the Dollar has been stronger and may offer some bonus returns as the greenback makes further gains against most major foreign currencies. In fact, foreign buying accounts for almost half of bank purchases in the US .

As our population ages, more assets will be reallocated from riskier stocks that provide growth to safer bonds, which provide preservation. These factors should keep fixed rates between 6% and 7%, with an average of 6.5% for the year.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,798 in January. That was down from $2,867 in December, and up from $2,344 from January a year ago.

Indicators of market distress are still largely absent. Foreclosure rates are coming up from last year¡¯s low point, but are still below normal levels. Down payments sizes are stable and there have been no significant shifts in market mix, DataQuick reported.

The real estate market is very hard to generalize. It is a market made up of many micro markets. Overall, it looks like 2006 will be a great year. But the busier we get, the easier it is to neglect the more important things in life¡­¡­ including ourselves. To help ensure a great year ahead, take the time to take care of yourself. Make YOU a priority. Hit the gym, get a massage and have fun. What good is your fortune if you aren¡¯t able to enjoy it?

 

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