From: SF Business Times

San Francisco Business Times - by Mark Calvey

Despite low mortgage rates and a new state tax credit, uncertainty still stalks the Bay Area housing market as potential home buyers worry about the strength of the economic recovery.

The $8,000 federal tax credit for first-time home buyers and another for move-up buyers both expired on April 30, but California stepped up with a $10,000 tax credit for eligible home buyers that kicked in May 1 and runs through year-end.

Couple that with mortgage rates near a half-century low, and April home sales in the Bay Area rose 5.9 percent from a year ago and the median price rose 7.2 percent to $583,280, according to the California Association of Realtors.

“The high-end of the housing market is really driven by confidence,” said Tom Biss, an agent with Sotheby’s International Realty in San Francisco, which is among the nation’s strongest housing markets. Europe’s financial crisis is spurring stock market volatility and giving potential home buyers pause, especially those with substantial money in stocks.

Statewide, municipalities with the biggest jumps in median price were the East Bay cities of Richmond, up 63.2 percent, and Pittsburg, up 56.7 percent, from a year ago. The gains likely reflect fewer foreclosure sales and more homes selling at the higher end of the market as tax credits boosted buying activity.

“It’s likely that the state tax credit that went into effect May 1 created an incentive for many buyers to postpone closing escrow so they could take advantage of both the state and federal tax credits that were available,” said Steve Goddard, president of the California trade group. “We should see the pace of closed sales edge up in May and June as these tax-incentivized transactions close.”

Some Bay Area real estate agents said foot traffic remained brisk this week, but that home buyers were seeking good deals.

“My clients want value. We’re negotiating hard,” said Christopher Stafford, a broker associate at Paragon Real Estate Group in San Francisco. He said one of his clients recently purchased a Mission district condo for $1 million, down 13 percent from its asking price earlier this year. Stafford said the federal tax credit was not a big motivator for his clients. Tax credits were more significant to buyers in lower-cost housing markets beyond the Bay Area.

Still, San Francisco’s housing prices seem to be rebounding from a year ago. The latest figures from the S&P/Case-Shiller’s composite index of 20 cities revealed that San Francisco enjoyed the greatest rebound of all 20 cities from a year ago, with home prices up 16.2 percent.

Nationally, the Mortgage Bankers Association reported that mortgages for home purchases, as measured by its weekly purchase index, remained in freefall in the week ended May 21, reaching the lowest level in more than a decade.

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