Change in Rates Not Expected

Investors do not expect the Federal Reserve to change rates this week, or before the end of the year. Rates could be cut eventually, but not as long as the economy shows no signs of deterioration. Still, a good time to buy. See www.juliahuntsman.com for properties on the market in the Long Beach area.

Federal Reserve May Leave Rates Alone This Week

Waning inflation may cause the Fed to leave rates alone, but investors do not expect a decrease unless the economy shows signs of deterioration.

Condo Prices Since 2005

A quick check on condominiums for zip codes 90803 and 90804 (which include the expensive shoreline areas) reveals the trend in number of sales is lower from 2005, but average (not median) price is significantly higher. From March 1 to September 1, 2005, there were, per the MLS, 216 closed escrows averaging $415,552; for the same period in 2006 there are 161 closed escrows averaging $445,535.

Your House Is A Home, Not A Tech Stock

Everywhere you read, it's all about the slowing housing market, or worse. Nobody likes to feel they bought or sold at the right time, but to make the best move you can you need to know your future plans a lot more than you need a crystal ball. Playing the wait-and-see game, as this Los Angeles Times 9/10/2006 article shows, doesn't always work out. Real estate is cyclical in nature, and if you buy and plan to stay at least five to seven years, you are more likely to be making a good investment. "But housing is not bought and sold as easily as tech stocks ... People who are rolling the dice, and not getting into real estate for the right reasons, are putting themselves at risk," says John Karevoll of Dataquick. "If you're planning on living in the property for three to five years or more, you can make a good investment today," he said. "It won't be as good as if you bought three years ago, but it will be better than if you wait until interest rates go up." So trying to time the market and sell early or wait to buy, as some people have learned, can be the wrong move for the wrong reasons. First and foremost should be an assessment of your needs, then try to match those needs with the best loan and the best house that you can get at the time.

Some Housing Update: Not All Pessimism

With the housing inventory on the market, it's not a time when buyers have to turn to FSBO's to find just the right house, contrary to the photo in the New York Times article. Buyers and sellers continue in a standoff while sellers are having to adjust to not being in total control as they have for the past few years. Though prices are basically holding, sales volume has decreased in most local zip codes, down by over 26% in 90803 compared to this time last year. Mortgage rates are still lower, while it may take the rest of the year to move the rest of this current inventory. This is definitely a good time for buyers, as they can now take adequate time to select their next home. See www.juliahuntsman.com for search for Long Beach and Orange County properties.

When Refinancing Makes Sense, to say the least

"Hell is probably pretty crowded right now, but I hope there's a special circle reserved for lenders who make low-interest, adjustable-rate mortgages without adequately explaining how they work and what their drawbacks are. And I don't mean just handing you a written form along with the mountains of other paperwork you receive when you apply for a loan. I mean talking to you about what could happen under worst-case scenarios -- until you understand your risks clearly. Low-interest, interest-only loans and so-called 'option' adjustable-rate mortgages (ARMs) that allow buyers to make only minimum payments evolved over the last few years to deal with the 'sticker shock' buyers felt when they saw how much home prices were ballooning every month.

Now home prices have stabilized, while rising interest rates are causing sticker shock. In fact, the non-partisan Center for Responsible Lending says 97.5% of borrowers who have teaser rates expiring on loans this year could face 'payment shocks' of at least 25%, while three-quarters could face increases of 50% or more.

Incomes can't possibly keep up with these bump-ups. According to recent government statistics, real median household income has remained almost flat -- rising only 1.1% last year, to $46,326, from the year before."
If you need refinance information or a quote, contact me at my website.

Mills Act Property Tax Abatement Program

For property owners living within Long Beach historic districts, the Mills Act may work for them to reduce their property taxes: The State describes it as: "A formal agreement, generally known as a Mills Act or Historical Property Contract, is executed between the local government and the property owner for a minimum ten-year term. Contracts are automatically renewed each year and are transferred to new owners when the property is sold. Property owners agree to restore, maintain, and protect the property in accordance with specific historic preservation standards and conditions identified in the contract. Periodic inspections by city or county officials ensure proper maintenance of the property. Local authorities may impose penalties for breach of contract or failure to protect the historic property. The contract is binding to all owners during the contract period."
This process includes bringing it before City Council for approval. Find historic districts under "community information" here.

What Caused This Market Anyway?

If you're looking for a fresh explanation for your buyers who are afraid they're buying at the wrong time and you're looking for solved real estate mysteries late at night, like how did the subprime mortgage market and our technologically driven society affect real estate, this 44 page article by two economists might have some answers: ..."the housing boom has not been driven by unusually loose monetary policy [i.e., not the Federal Reserve's low interest rates for the last several years]. This is not to say the monetary policy has not been unusually loose, but that to the extent it has been loose, this is not what has been driving spending on housing. Second, the current levels of spending on new housing are largely explained by technology-driven wealth creation over the previous decade. Third, changes in the demographic, income, educational, and regional structure of the population account for about one-half of the increase in homeownership. That is, without any other developments, the homeownership rate is likely to have gone up anyway, but not by as much as it has done. The last finding is that substitution away from rental housing made possible by developments in the mortgage market, such as subprime lending, could account for a significant fraction of the increase in residential investment and homeownership." --From "The great turn-of-the-century housing boom" by Jonas D. M. Fisher and Saad Quayyum.

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.

Housing Demand Keeps Prices Up

California has the second-highest increase in the number of housing units of any state last year, adding over 181,000 new dwellings. Yet house building sources and others say that California should be building 250,000 new units per year, and that we are not keeping up with the demand in this state. This demand will maintain the real estate for many years into this future in the west, due both to immigration from other states and other countries, and natural population growth.