By Jim Christie
SAN FRANCISCO, May 18 (Reuters) - Home sales in the San Francisco Bay area fell in April to their lowest in five years on a year-over-year basis, potentially signaling a downturn in one of the most expensive U.S. housing markets, according to a report released on Thursday.
Exorbitant home prices paired with rising mortgage interest rates sidelined many of the region's prospective home buyers last month and may do the same in coming months, the report by DataQuick Information Systems said.
The La Jolla, California-based real estate information service tracked 8,358 new and resale houses and condominiums sold in the nine-county region in April, down 14.2 percent from March and 25.1 percent from a year earlier.
The declines may point to a lull, or, worse, a downturn after a boom in sales since early 2002.
"Many of the fundamentals for housing are at a crossroads: Inflation, interest rates, demand, household incomes, prices, and whether homes are a good investment compared to other investments," said Marshall Prentice, DataQuick's president. "Summer is going to be interesting to say the least."
Analysts have expected for months that California's hot local homes markets would experience significant cooling this year because mortgage interest rates have been on the upswing, raising the cost of financing purchases of pricey homes.
Home sales in California are cooling just as automobile sales do when no- and low-interest financing promotions expire, said Stephen Cauley, director of research, at the Ziman Center for Real Estate at the UCLA Anderson School.
"It is not at all surprising," Cauley said. "Take a look at what happens when GM offers free financing before January 1. Everyone who wants a car will buy one before January 1 ... We've moved (home) sales from the future forward."
The steady climb in home prices in the San Francisco Bay area also is pressuring home sales.
The median price paid in April for a home in the region, which includes Silicon Valley, edged up 1 percent from March and rose 7.2 percent from a year earlier to a record $628,000.
The region's year-over-year price increase last month was the slowest in nearly three years and the area's median price is well above twice the national average, prompting many home buyers to "sit it out," said Mark Riedy of the Burnham-Moores Center for Real Estate at the University of San Diego.
Rising gasoline prices, political discontent and fear of rising inflation also may be causing many prospective home buyers to flinch, and some may be trying to time the housing market, said Riedy, a former president of Fannie Mae.
"Will there be some better bargains over the summer months? Probably, because some people who took out mortgages that stretched them too far will be forced to put their houses on the market," Riedy said.