10/26/2006

Housing Perspective: No High Unemployment, No High Interest Rates

Although the media has focused on the downside of the changing real estate market, there are also compelling messages about real estate that consumers need to remember:

Ø Prices are still going up. In September, the median home in Orange County home increased 2.6% and 3% in Los Angeles County, as compared to September of 2005. This is a healthy adjustment considering housing prices increased 80% over the last five years.

Ø Interest rates are low. Rates for 30-year fixed mortgages have dropped as low as 5.8%. That’s a great rate!

Ø There is a healthy supply of inventory, not necessarily an oversupply. The unusually quick sales cycle of recent years has created unrealistic expectations. California Association of Realtor's 25-year historical data reports that in California the average Unsold Inventory Index is 7.7 months. According to data from Southern California MLS, the current Unsold Inventory index is 6.2 month’s supply.

Ø Homes are selling. We live in a highly desirable part of the country. In September, 2,664 homes closed in Orange County and 7,917 closed in Los Angeles. Currently, there are 2,787 pending sales in Orange County.

Ø Today’s UCLA economic forecast reports that home sales should increase next year as the current stalemate between buyers and sellers pushes some pent-up demand into 2007.

Ø Dataquick reports that NONE of the flags of market distress have begun to appear. The distress flags were cited as high foreclosure rates, over-borrowing or high amounts of speculative buying.

Ø It’s critical to infuse some historical perspective in the current marketplace. Prior housing downturns were precipitated by high unemployment and interest rates. Conversely, today’s interest rates are low and we have a dramatically expanding job market.

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