SAN FRANCISCO (CBS/AP) — California home prices surged to their highest level in more than five years last month as demand outpaced a thin supply of properties, a research firm reported Thursday.

The median price for new and existing houses and condominiums reached $340,000 in May, up 25.9 percent from $270,000 the same period last year. The median price rose by $16,000 during the month to its highest level since April 2008, when it was $354,000.

Prices posted a 15th straight annual increase in May as investors and cash-buyers competed for homes, keeping a lid on sales.

Sales increased 1.2 percent from last year to 42,293 homes, the strongest May sales tally since 2006. Still, sales weakened in many parts of the state, including a 14 percent decline in San Francisco.

The numbers provide the latest evidence that California housing prices are soaring amid low inventories. The median price for new and existing houses and condominiums in the San Francisco Bay Area hit $519,000, up 29.8 percent from $400,000 the same period last year to mark the 12th straight month of double-digit annual increases and seventh straight month of increases above 20 percent.

Yet some of the Bay Area’s most populous counties posted flat or declining sales, with Alameda down 10.5 percent from last year, Santa Clara off 3.7 percent and Contra Costa up 0.1 percent. Overall there were 8,541 homes sold in the nine-county Bay Area, down 4 percent from last year.

Michael Lea, director of San Diego State University’s Corky McMillin Center for Real Estate, said prices will stabilize as fewer people owe more than their homes are worth, positioning them to put their homes up for sale.

“I don’t think we’re in a bubble by any means because it’s mostly the lack of inventory,” Lea said. “Lending standards haven’t loosened up.”

At the end of March, 21.3 percent of California homes were in “negative equity”—meaning the outstanding loan balance exceeded the home’s value—down from 25.2 percent three months earlier, according to CoreLogic.

“We do not have a healthy market, we have an unusual market,” Lea said. “The high percentage of people with negative equity means people can’t sell.”

There was a 2.8-month supply of unsold single-family homes on the market in April, compared with a 4.2-month supply a year earlier, according to the most recent data from the California Association of Realtors. A five- to-seven-month supply is considered normal.

In another sign of tight supplies, California single-family homes were on the market for an average of 27.9 days in April, compared with 48 days a year earlier.

The lack of homes for sale has produced bidding wars in which cash buyers often have an edge.

Cash buyers purchased 27.6 percent of Bay Area homes last month, down from 28.3 percent in May 2012 but well above the monthly average of 13.1 percent since San Diego-based DataQuick began keeping track in 1988.

In Southern California, cash buyers purchased 31.9 percent of homes last month, down slightly from 32.1 percent a year earlier but above the monthly average of 16.1 percent since 1988.

DataQuick reported Tuesday that Southern California home prices rose at the fastest annual clip in May in nearly nine years. The median price for new and existing houses and condominiums reached $368,000, up 24.7 percent from May 2012.

All six counties posted double-digit price increases, giving the region its highest median price since May 2008, when it hit $370,000. Sales rose 3.8 percent, as brisk activity in San Diego and Orange counties offset weakness in inland areas.

(Copyright 2013 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)


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