Calif. Median Home Price Up 2% in January

The market has not declined, the price continues upward for now, and inventory increased in January, but is still low by historic standards. Buyers have a little more breathing time to make an offer, sellers are still rewarded with a strong market statewide. What fuels this increase? Total sales for 2005 may be lower than 2004, but in California demand outweighs supply. There may be several reasons for this demand, chief among them is increased population. Read C.A.R.'s report for more.

First Time Buyer Alert!

California first time homebuyers in particular already know the challenge of entering this market where first time homebuyers are only about 26% of all homebuyers, a record low. Assembly Bill 62 has just been introduced by Audra Strickland which proposes and assessment reduction equal to 25 per cent of the property's value. Property taxes are assessed at 1% plus .25% for state bonds, and this proposal would take about $1,200 off your property taxes, considering the median price of a home here is $473,000. This is a bill to follow, and read this for more.

Prices Still Going Up

This time last year, a lot of economists thought the market had reached its peak; a lot of people thought that about 3-4 years ago too. But a National Association of Realtors economist, Lawrence Yun, says he expects a continued rise, but of about 5% in the next year due to anticipated rises in interest rates. He doesn't expect prices to fall because job creation is expected to rise, baby boomers are buying bigger homes, not smaller ones, and the home inventory available for purchase is at an historic low, expecially in California. Read here for more.

Fed Chief Sees Localized Bubbles

Attributing homeowner wealth largely to the upward run in home equity, Alan Greenspan admits to problems in some geographic areas, but not nationally. "Remember that there's a very significant buffer in home equities at this stage," he said, referring to the $9 trillion difference between home values and outstanding mortgage debt.Fed chief sees home price bubble - The Washington Times: Business - February 18, 2005

Excessive Regulations Driving up the cost of Housing?

The U.S. Dept. of Housing and Urban Development (HUD) has taken a look at housing costs, and released a report on excessive regulations which restrict available land for development which might otherwise be used. Impact fees, environmental regulations and "smart growth" may be misused to justify limiting affordable housing production. Obsolete building codes limit more cost-effective building materials, and HUD is now requiring a review on all proposed regulations to determine their impact on affordable housing before taking effect. See this article about HUD, and then go to here to read the Wall Street Journal's article on the median price for a condo exceeding the median price of a single-family home for the first time. Condos have begun to fuel their own market as they increase in number in more expensive and up-scale urban areas. In the meantime, the FDIC attempts to review housing booms, which may or may not be followed by a bust. U.S. Home Prices: Does Bust Always Follow Boom? reports that the recent growth in home prices surpasses any of the last 25 years. A boom is an increase of 30% in three years, and a bust is a 15% decrease in 5 years, according to the FDIC, driven down by economic shocks. The change in today's credit market is uncharted territory and differs from past history--an additional factor which challenges the crystal ball readers who attempt to predict the conclusion of this current economic cycle.

Should I Buy Now or Wait?

This article says: "Numerous factors determine whether prices are in line with what people can afford and are willing to pay. These include job and household growth, inventory levels, rents, in-migration from other areas, land costs, new-home supply and discounts being offered on them, and the age of the housing stock." These factors may change suddenly, i.e., the Enron scandal, or not. Also, psychological factors about where you want to live and why weigh in strongly.

So if you plan to live in an area for two-plus years, and you can afford that area, you're better off buying, especially with present interest rates. Even though many people were hurt in the 1990's recession, those who could stay put for 7-8 years were able to ride it out. Not even the best predictors know when the market will actually turn--we've been hearing that interest rates will rise for a long time now, but they've held to the same levels. Read here for this Wall Street Journal article.

2005 Market Expected to be Second Highest on Record

Existing home sales, nationally, may decline about 2 percent from last year's record, with the economic conditions this year expected to be similar to 2004, according to the National Association of Realtors. Prices may climb upward, but at a slower rate, with interest rates, income and prices considered to remain favorable. California's current median price of about $479,000 is expected to rise over $500,000, according to the California Association of Realtors. Click here for more information. NAR is expected to post benchmark revisions based on updated census data and approval by the Federal Reserve Board on February 25.

What Does Your Credit Score Reveal?

Should your credit score (that FICO number) be used to determine the amount of your insurance premium? Most consumers would be against that, but a study in Texas claims there's a link between credit scores and filing insurance claims. Read here to see the article.

So What Really IS the BIGGEST Homebuying Mistake?

Read this and you'll find out ... It's not just one thing as this author says, because it depends on who you talk to in the real estate industry. There are so many factors in a successful home purchase, and unsuccessful ones, that it's hard to know them all at one given time. But one thing a buyer can do is, like the Cub Scout motto, "be prepared." Take the time to do research, don't fall in love with a house so much that you forget your budget. Doing the research does mean doing some of all the things mentioned in each of the categories in this article, and then find someone you trust to work with, the next most important thing. Read here about Avoiding the Biggest Homebuying Mistake

Fed Hikes the Rates Again by .25

So the Federal Reserve has raised the short-term interest rate again, but why did long-term interest rates actually go down since last June? According to this article, Fed hikes rates again, long term rates reflect worry about inflation, and apparently investors in many market sectors are not worried significantly about inflation, i.e., yields on Treasury notes. The Fed threatens to raise rates and "measured" intervals, however, rates for mortgages, auto loans, longer-term home equity loans don't respond directly to those increases. Read the article for more information.