The median price paid for a Bay Area home jumped in May as more expensive homes started to sell again. The overall number of homes sold increased for the ninth month in a row, according to DataQuick.

The median price paid for a home in the nine-county region rose 12.3 percent  in may compared to April  and 17.8% higher than March of this year.

What led to this increase is a small but noticeable increase in sales of homes financed with home loans between the “conforming limit” of $417,000  and the new “super conforming” limit of $729,950 and above.  Super conforming and jumbo loans accounted for 25.5 percent of the Bay Area’s home sales last month, the highest since last October. Two years ago it was more than 60 percent. The sales of those higher priced homes in the statistics is pulling the median price up.

In the Bay Area counties, sales of $800,000-plus priced existing single-family houses rose to 13.2 percent of all house resales last month, up from 9.8 percent in April.  Sales of sub-$400,000 existing houses dropped to 57.5 percent of May sales, down from 62.2 percent in April.

What is contributing to this market trend?

1.      Banks are now better equipped to handle the sale of foreclosed properties and they have begun to price them to the market.  They also have improved the way they process short sales.

2.      Real estate agents are now more knowledgeable about bank owned and short sales properties and can better educate buyers about what to expect.

3.      Liquidity has come back to the conforming and “super conforming or high balance conforming “  loan market, plus the high balance loans were increased to $729,750 in most of the bay area.

4.      The use of government-insured FHA loans has become a more common choice among first-time bay area buyers – representing 24.5 percent of all Bay Area purchase loans in May, up from 7.3 percent a year ago.

Where do we go from here…Eighteen months ago, housing at all levels had a predictable supply of mortgage money. But when Fannie's and Freddie's accounting problems got the better of them, and most of Wall Street's investment bankers were unable to pay their bills, private investors pulled out of the mortgage market practically overnight.

As I mentioned last month in my blog “Where have all the Jumbos gone”, liquidity must come back to the jumbo loans before the “move up “ market can return to health.  Jumbo loans accounted for 60% of all mortgage loans in the bay area 18 months ago, now it is less than 5%.

We are seeing some signs of life with some lenders coming back to making loans above $729,750.  The spread between fixed conforming and jumbo loans remains high at about 1 ½ percent, however, Jumbo 5 year fixed loans are available below 6%.   The down payment requirement for Jumbo loans is 20% to 25%.

What all this means is that when there is a predicable availability of mortgage loans, low rates and supply, there is a viable market.  The market is steadily improving and the median price is increasing.  This is a great time for first time buyers and investors.

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They have served clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.