9/28/2006

Where Are the Prices Going?

Per Inman News today, "Already, home prices have dipped in some markets. 'There are some cities and some states that have experienced slight price declines so far this year, but we are very far from a Great Comeuppance in which the extraordinary appreciation of the last five years is taken away,'" according to the Edward Leaver about the UCLA Anderson Forecast scheduled to be delivered today. Factoring in inflation, "the forecast calls for the market prices of homes to hold steady, which equates to a drop of about 15 percent to 20 percent in real terms because of continuing inflation. Also, the forecast calls for a lowering of the Federal Funds Rate from its current level of 5.25 percent to 4.5 percent by mid-2007."
That's a significant drop, but maybe not impossible.

A separate Anderson Forecast report, "The California Report," also does not expect a recession for the state. "We are still firmly convinced that the national economy is the primary driver at the state level: statewide home prices (in California) are unlikely to decline significantly unless there is a recession," and a recession means a significant cut in jobs, and a cut in paychecks. That's what we had in the 1990's--so do the buyers who think they're going to get a "deal" with a 30 percent or more drop in prices think it will necessarily happen in a vacuum and their paycheck will not be affected and their buying power will automatically increase? It doesn't work that way--while it will take a while for some sellers to get the message, that doesn't mean the buyers will be getting the selling price of 1999. It's best to take advantage of the lowest interest rate you can get: Interest rates impact the monthly payment more quickly than an increase or decrease in home prices.

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