La Jolla, CA.–Bay Area home prices continued to rise in May, the result of an improving economy, low mortgage rates, pent-up demand and continued investor interest. Sales remained below average, mainly because the supply of homes for sale remains unusually tight, a real estate information service reported.

The median price paid for a home in the nine-county Bay Area last month was $519,000, up 1.8 percent from $510,000 in April, and up 29.8 percent from $400,000 in May 2012. That was the highest median since March 2008, when it was $536,000, according to San Diego-based DataQuick.

The Bay Area median peaked at $665,000 in June and July 2007, then dropped as low as $290,000 in March 2009 – a decline of $375,000, or 56.4 percent. In May the median was still 22.0 percent below the peak but it had made up about 61 percent of its peak-to-trough loss.

Much of the median’s ups and downs can be attributed to shifts in the types of homes sold. When adjusting for these shifts, it appears that about three fourths of the 29.8 percent year-over-year rise in the May median sale price reflects an increase in home values, while the rest was market mix.

“In a year or two, we’ll probably see in hindsight that a bounce off the bottom was faster and easier than later incremental gains in a more balanced market. As it is, today’s market is still re-establishing equilibrium. Among potential buyers there is clearly a sense that favorable factors are lined up right now in a way they may not be in a year, or three or five years,” said John Walsh, DataQuick president.

A total of 8,541 new and resale houses and condos were sold in Bay Area in May. That was up 12.1 percent from 7,621 the month before, and down 4.0 percent from 8,899 for May a year ago, DataQuick reported.

Sales increase on average by 7.3 percent from April to May. Since 1988, when DataQuick’s statistics begin, May sales have varied from 6,216 in 2008 to 13,567 in 2004. Last month’s sales were 11.2 percent below the May average of 9,622.

The number of homes sold in May for less than $500,000 fell 28.2 percent year-over-year, while the number sold for more rose 17.3 percent.

May’s distressed property sales – the combination of foreclosure resales and “short sales” – made up about 21 percent of the resale market. That’s the lowest since it was about 19 percent in December 2007. Last month’s distressed property level was down from about 24 percent in April and about 42 percent a year ago.

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 7.3 percent of resales in May, down from a revised 8.4 percent in April, and down from 21.4 percent a year ago. Last month was the lowest since 6.9 percent in September 2007. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is about 10 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 13.9 percent of Bay Area resales last month. That was down from an estimated 15.0 percent in April and down from 21.2 percent a year earlier.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 47.7 percent of last month’s purchase lending, up from a revised 47.6 percent in April, and up from 37.2 percent a year ago. Last month’s jumbo share was the highest since it was 58.6 percent in August 2007, when a credit crunch hit and made jumbo loans harder to get. Jumbo usage dropped to as low as 17.1 percent in January 2009.

Adjustable-rate mortgages (ARMs), an important indicator of mortgage availability, accounted for 14.5 percent of the Bay Area’s home purchase loans in May. That was up from a revised 14.3 percent in April, and up from 14.2 percent in May last year. Since 2000, ARMs have accounted for 48.0 percent of all purchase loans. ARMs hit a low of 3.0 percent of loans in January 2009.

Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 12.3 percent of all Bay Area home purchase mortgages in May, up from a revised 12.0 percent in April and down from 17.0 percent a year earlier. In recent months the FHA level has been the lowest since summer 2008, reflecting both tougher qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers.

The most active lenders to Bay Area home buyers last month were Wells Fargo with 14.4 percent of the market, RPM Mortgage with 4.9 percent, and Stearns Lending with 3.7 percent.

Last month absentee buyers – mostly investors – purchased 25.0 percent of all Bay Area homes. That was up from 24.1 percent in April, and up from 24.4 percent a year ago.

Buyers who appear to have paid all cash – meaning no sign of a corresponding purchase loan was found in the public record – accounted for 27.6 percent of sales in May. That was down from a revised 28.3 percent the month before and down from the same amount, 28.3 percent, a year earlier. The monthly average going back to 1988 is 13.1 percent.

San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Because of late data availability, sales were estimated in Alameda, San Francisco and San Mateo counties.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $1,874. That was up from $1,821 in April, and up from $1,491 a year ago. Adjusted for inflation, last month’s payment was 34.0 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 51.2 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and peak levels reached several years ago. Financing with multiple mortgages is low and down payment sizes are stable, DataQuick reported.

Source: DataQuick, www.DQNews.com

Media calls: Andrew LePage (916) 456-7157

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