California Median Home Price Up

The October report from Dataquick puts the California residential median home price at an increase of .2 percent from September and 2.9 percent from one year ago. Remember, Dataquick's median home prices combine single family houses and condominiums, which results in a lower median price than the California Association of Realtors figures which separates the two categories and results in a higher median price. But the figures show that while sales volume is down, prices are holding with stable down payments and a slight decrease in the monthly mortgage payment compared to what buyers committed to last month. For a property search, got to www.juliahuntsman.com.

"Big Decline" In Sales is How Big

Compare '70s to now and compare housing cycles.
The current drop in housing sales volume might look a little different when you put it in the perspective of previous real estate markets. Nationally, the 1970's-80's had a 48% decline in sales and a 2% decline in jobs, compared to today's 9% decline in housing sales and 1% gain in jobs. This information from David Lereah of the National Association of Realtors (now having its annual conference in New Orleans)takes a look at the national market, but download the entire Powerpoint presentation for the complete story.

Los Angeles and San Francisco: Bubbleproof?

CNN/Money rates these 2 California cities as good for investors. Take note of the average annual appreciation--3.7% annually for Los Angeles since 1949. High end development is the draw now, while current homeowners are still seeing plenty of equity in their properties.

Mortgage Rates Move Up

Employment figures, or news about it, usually are a confidence measure that has immediate impact on interest rates. While the construction industry has had problems selling its houses and has lost some jobs, other job figures for the last 3 months went upward. In the meantime, California shoppers report that in spite of high gas prices and a drop in house prices, they're going Christmas shopping anyway. With the basic "upbeatness" of the economy, National Association of Realtors' economist David Lereah today predicted 2007 homes sales will continue at about the same rate as 2006, but homes prices may have a "modest gain" on the national level. Low mortgage rates allowed a huge wave of first time buyers into the market, which took up the slack in the last 2-3 years. The rate of sales is now at a more "normal" level, while mortgage rates are still low overall.

Three Reasons to Buy

Six blocks to ocean for $649,000
Interest rates have fallen seven months in a row and are near 40-year lows, inventories of existing homes are higher than they have been in decades, and prices have stabilized. Search Long Beach area properties at
www.juliahuntsman.com.

Conditions Optimal for Buyers Now

The National Association of Realtors says, "Home sales will remain stable in the months ahead, according to NAR's most recent Pending Home Sales Index (PHSI). In September, the PHSI stood at 109.1, down 1.1 percent from the previous month and down 13.6 percent from September 2005. The index gauges home sales activity for upcoming months based on the number of transactions that have signed contracts but are not yet closed. A PHSI of 100 or more generally indicates a high level of homes sales activity. ... In the West, the index fell 15.2 percent to 112.5."

"The present level of home sales is relatively high in historic terms, and we can
expect generally minor movements around this level. We don't expect to see any changes of note until early next year when we're likely to see a modest lift to home sales," said NAR Chief Economist David Lereah. "The market currently is a little lower than expected as buyers try to time their entry. In the meantime, there's some buildup in demand that will move when consumers realize that conditions are optimal for them."

Calif. median home price - September 06: $553,050 (Source: C.A.R.)
Calif. highest median home price by C.A.R. region September 06:
Santa Barbara So. Coast $1,025,000 (Source: C.A.R.)

Calif. lowest median home price by C.A.R. region September 06:
High Desert $329,040 (Source: C.A.R.)

Calif. First-time Buyer Affordability Index - Second Quarter 06:
23 percent (Source: C.A.R.)

Mortgage rates - week ending 10/26:
30-yr. fixed: 6.4%; Fees/points: 0.4%
15-yr. fixed: 6.1%; Fees/points: 0.4%
1-yr. adjustable: 5.6%; Fees/points: 0.7%
(Source: Freddie Mac)

2007 Housing Market Forecast by California Association of Realtors

The California Association of Realtors Expo tradeshow, the largest in the nation, was hosted at the Long Beach Convention Center this week, and an exciting show it has been. The annual California Housing Market Forecast by the Associations' Chief Economist outlined predictions for the housing market for 2007. Not surprisingly, a modest decline in the statewide median price (2 percent overall) is predicted with fewer sales overall. Some areas, such as San Bernardino and San Diego as well as second-home markets, may experience greater sales volume decline than others during the coming year, which is not expected to bear as a great a sales decline as 2006. The market momentum of the past several years has slowed, but keep in mind that California real estate has always been a good investment: since 1968, long-term price appreciation has averaged 9.1 percent.

Take Another Look: No Housing Bust

This link to Kenneth Harney's Los Angeles Times article of October 16, 2006 will not last indefinitely, but it's well worth reading. Mortgage interest points have declined in recent months to 1 percentage point above 40-year lows; mortgage applications are up; unemployment is down; pending home sales are up as of NAR's October 2 report. The market is returning to 2003 levels, which was in itself a banner year for real estate sales.

All of which begs the question, "Just what kind of housing bust is this anyway? With gloom-and-doom purveyors forecasting imminent crashes in dozens of metropolitan areas, how could such key fundamentals as jobs, interest rates and even pending home sales simultaneously be trending in the opposite direction?" It's not a bust, it's a correction.

In a nutshell: "So, what's the source of some of the confusion about just where housing is headed? Mike Moran, chief economist of Wall Street's Daiwa Securities America, minces no words: The financial press and TV news shows are over-dramatizing what is a normal and long-predicted cyclical re-balancing, and 'portraying it as a catastrophe,' he said." With such eminent notables as the vice-chairman of the Federal Reserve, a managing director at JP Morgan Chase and the chief economist at Morgage Bankers Association all pointing out the "robust" economic indicators, buyers should certainly be taking note of the not-so-big market dip in prices.

Home Price Forecast

Every day predictions can be found somewhere in the media as to where future prices will end up. Some local prospective buyers are expecting to see a 20 percent price drop in the Long Beach area in the next few months. That we are in a slower market, and a softening market, is more obvious. That predictions do not always come true ... we know about that, too. However, the Long Beach/Los Angeles area market, based on current projections, doesn't show that kind of a price drop, just check the list of cities and scroll down to Los Angeles to see an approximate 5 percent drop over a period from 2006 to the end of 2008. Another prediction is that interest rates for now and in the next several months will not be increased by the Federal Reserve. That is as good a prediction as any, and should be very helpful to those buyers thinking about making a move soon. See a property search from the local MLS here.

Quote of the Week

"Someone who really wanted to know what is going on would have to dig deep to find reality: a decline in median prices just means that more cheaper homes are selling than expensive ones; the median says nothing about the fate of an individual house or neighborhood, or city." Lou Barnes, Inman News.

For instance, some news sources quote a different monthly median price than others because they calculate in the price of condos with homes for the monthly median selling price--in the majority of markets condos sell in a lower and separate niche than single family homes. To commingle them gives a different picture than when compared separately.

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.

California Median Price Up, Sales Volume Not

Fulfilling the general anticipation of a slowing increase in price appreciation, California's median home price, according to California Association of Realtors, reached an all-time high in August, 2006, of $576,360, a 1.6% increase over August, 2005. August 2006 price increased 1.7% over July, 2006. The homes are on the market 90 days or longer has quadrupled compared to last year, and sales volume has dropped 30.1% compared to last year. Home prices in specific areas however increased by as much as 46% (Ladera Ranch) compared to a year ago. Manhattan Beach has the greatest median home price ($1,850,000), with Santa Barbara, once the highest median price in the state, trailing 10th at $1,107,000. The statewide appreciation was anticipated for all of 2006 to be 5-6%.

The Return to a Normal Market?

This Los Angeles Times article (July 23, 2006) may not stay available online much longer, but it's a good discussion of the current Southern California market picture. People afraid of a return to the '90's recession may be worrying unnecessarily. As has been stated often, the market fundamentals today are vastly different than those of the '90s, says John Karevoll of Dataquick Information Systems. He, and many other economic sources including California Association of Realtors, still predict an overall appreciation in the median home price of 6% or more, in the Southland and statewide. While one simply cannot know all the future events, Karevoll is willing to be quoted saying in a worst-case scenario, homeowners should not lose more than 7% of their homes' value. So the current standoff between buyers and sellers, with buyers waiting for a huge drop in prices, is not supported, not in this article anyway. Areas with overbuilding in condos have seen a drop, but that does not mean all condo prices in all areas are losing. Some sales figures, or lack thereof, reflect a dropoff in activity after a long held back huge demand has been met, and then overmet. The frenetic activity from selling a home in a week or two has definitely slowed, but many younger buyers see that as a "drop in the market" because they never experienced anything else, or what the historical "norm" has been of 30-90 days on the market.

Dataquick: Median Prices Still Higher Than 2005

While numbers of homes sold are lower according to Dataquick's information, median home prices (single family and condo prices together)in the Southern California counties, except San Diego County, are still higher than the same time in 2005. Typically the condo market is a lower priced market than single family homes within most areas. The zip code charts provide a much more specific breakdown by zip code and by type, so carefully check your area to view comparison information and actual local market sales medians.

California Median price Over $575,000

The number of single family home sales decreased by 26.3 percent from June, 2005, but the California median price is at a new high of $575,800, according to California Association of Realtors on July 25, 2006. This data is drawn from regional MLS's maintained throughout the state. Statewide, the median price for condos was $430,600, a 1.3 percent increase from June 2005.

"Statewide, the 10 cities and communities with the highest median home prices in California during June 2006 were: Beverly Hills, $1,877,500; Burlingame, $1,725,000; Manhattan Beach, $1,575,000; Los Altos, $1,543,500; Newport Beach, $1,347,250; Saratoga, $1,309,000; Mill Valley, $1,294,500; Palos Verdes Estates, $1,225,000; Orinda, $1,207,500; La Cañada Flintridge, $1,150,000.

"Statewide, the 10 cities and communities with the greatest median home price increases in June 2006 compared with the same period a year ago were: Delano, 94 percent; Beverly Hills, 44.9 percent; Barstow, 36.9 percent; Culver City, 35.5 percent; Porterville, 34.6 percent; Paramount, 31.7 percent; Inglewood, 31.3 percent; Laguna Hills, 30.6 percent; Arroyo Grande, 30.5 percent; California City, 28.3 percent."

Median Price Increases in Southern Calif.

The six counties of Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange saw a median home price of $493,000--an increase from the May median price. The overall price increases have slowed, but the number of sales was also up from May. National and local Realtor associations have claimed 2006 will see an overall median price increase, nationally and locally, of about 5-6% for California statewide. Some local markets may fluctuate, but the overall appears to be stabilizing. See the Mid-Year Report at my website.

Housing Market Cools in SoCal - Los Angeles Times

"DataQuick said that the median sales price for all homes sold in Los Angeles County last month rose 8.8% to $517,000. The county's median had been posting annual gains of 10% or more until recently." San Diego's median price for June dropped 1%, the first time in 10 years that market has lowered. Sales in Los Angeles County have decreased, although the median price increased in June.

NAR: Home Sales Expected to Stabilize In the Months Ahead

"Don't look for any big shifts one way or the other", says NAR economist David Lereah. Higher increases in interest rates are a concern, but median home prices nationally will go up about 5.3 percent overall. Sellers should understand that "abnormal" price growth has cooled. While buyers may see larger price decreases in some market and with some properties, they should also understand that certain price decreases may be expected if the seller has overreached the current market, but that it doesn't mean there will be a huge decrease overall in the market. The median price in the six Southern California counties has not dropped during the Spring (see earlier post).

UCLA: No Decline in Prices

This slower market is not a sign of a recession because the Southern California and national economy is strong and there is no "vulnerability" in the job market. The speculative demand got way out of hand, which drove prices up even higher, but the speculative buyer has departed the market. Speculators enter and leave the market suddenly, since they lack the emotional component about their properties that the usual residential seller has.
So the bottom line is: "We do not predict a recession, nor do we predict a substantial decline in average nominal home prices," said Ryan Ratcliff, a UCLA economist. "The forecast is based on two arguments. There is not enough vulnerability in the usual sources of employment loss to create a recession, and the historical record suggests that average home prices do not usually fall without this kind of job loss."

Direction of Housing Market

It's official -- the federal funds rate has been upped another quarter point to 5 percent, the rate at which banks borrow money from each other. Usually, the mortgage rate has already risen in anticipation of that increase. Apparently, our gas price increases are not enough to counteract inflation, and the housing market's slower activity, among other things, is cited as having a cooling effect on the economy. It's not the end of the world, but something to think about if you're thinking of buying or selling this year. The NAR's May forecast predicts a rise to 7 percent this summer in 30-year-fixed rates, but is still holding to the prediction of a rise in the national median home price by 5.7 percent, California’s price was expected to appreciation about 5-6 percent over 2005 prices, and we now have “equilibrium” in the housing market, price vs. supply. Over all, locally, residential properties including condos, houses and income properties up to 4 units are selling, since 3/10/2006, on average, in 52 days within 2 percent of the list price at time of beginning escrow.