Monthly Dataquick Summary for Southern California

While Los Angeles County area sales volume is down by about 18 percent compared to last year, the monthly mortgage buyers committed to during November was still in the $2200-2300/month range. This picture is still similar to the ones from other quarters: The Southland has continued to hold its own in pricing--Los Angeles County's median price (including single family homes and condos) has increased by 2 percent from November of 2005. For zip code breakdown information, go here and check your favorite area.

The Real Estate Market: It Depends on What You're Talking About

A 3rd quarter report based on a federal survey of Fannie Mae and Freddie Mac mortgages basically reflects several scenarios which have all been tackled in the media--the market is up, down, way down, or still there. Depending on which scenario you're looking for, you can find one (but various analyses of the West Coast bear this out repeatedly):

Without question the most impressively documented scenario is that many large metropolitan markets -- including some that experienced high gains during the boom years -- are still hanging in there and registering net appreciation, albeit at lower rates.

Examples include Fort Lauderdale (10.3 percent annualized quarterly gain), Naples, Fla. (10.8 percent), Los Angeles (7.4 percent), metropolitan Washington (3 percent), New York City and its northern New Jersey suburbs (3 percent), Seattle (14.8 percent), Miami-Miami Beach (14.7 percent), Chicago (5.2 percent), Orlando, Fla. (6.5 percent) and San Antonio (9.9 percent).

Click this article for a look at all scenarios.

Why Are Interest Rates Staying Low?

In a word, more or less, it's foreign investors in bonds. Mainly from Japan and Hong Kong, who comprise about 52% of all Treasury values. The demand for U.S. Treasury bonds has kept their prices up, and mortgage interest rates down (the first affects the second). Foreign investors find stability here they don't find in their own countries, and for you the buyer, that means your 30-year interest rate is about 30 percent lower than it might be otherwise. Read the article for more on this relationship, and remember that it's giving you still a very great opportunity to buy as mortgage interest rates stay much lower than predicted for the last few years.
See a property search at my other website.

More Consensus That Worst May Be Over

Investment firm analysts and the Federal Reserve Chairman Ben Bernanke are among those that are ready to think about an improvement in the market. All the bad news in the media may have helped to create a self-fulfilling prophecy about the market, and so now good news in the media may help to get buyers and sellers into a better mode. To be sure, some properties have been overpriced, but a healthy economy does not usually create the setting for a bad housing market. Click on the link for the Los Angeles Times article.

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.

The Housing Market Slump

Long and short term mortgage rates went down last week on average of .5 point. When buyers understand they're getting more breaks on their rates, they'll decide now is a good time to act. More housing inventory has taken pressure off, but at some point, in the not-too-distant future, buyers will suddenly come alive and if they do it all at once, they may be wondering what happened to a certain property. The answer will be, somebody already bought it. Don't get fooled by the slow times, they won't last forever in a strong economy.

"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)

Rose Park South Historic District

This is a two bedroom plus den single family in a Long Beach historic district within walking distance of the ocean. This 1920's home features recent upgrades in the kitchen and bathroom, new landscaping with auto sprinkler, refinished hardwood floors, completely enclosed rear yard. This area is zoned for 2 units, a great plus! Please contact me for more info on this well-priced home. NOTE: SOLD JAN, 2007

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.

No Change in Rates

The Federal Reserve maintained its hold on rates today, noting the cooling housing market, but still "feels the economy will expand." Because of this cooling market, some lenders are softening requirements for certain loans, which is the best opportunity for buyers with uncertain FICO scores in the low 600s. If qualified at a higher rate a while back due to that problem, take another look now, you may be qualified for a lower rate.

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.

The Number of Pending Home Sales

... rose in August compared to July, 2006. This index is used by the National Association of Realtors to rate activity in sales. If there is an anticipated reduction in listings on the market, as this index might show, that may mean price stabilization in the near future. Demand gets closer to supply. Pending home sales usually close 30-60 days. September and October data will tell more of the story. See this website for more real estate information.

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%.

What Is The Current Time On Market

What’s the time on the market. A quick check in our local MLS for houses in 90803 (Long Beach near the coastline and adjacent neighborhoods) shows 117 single family residences at an average active list price of $1,444,122, with 25 in escrow: That means about 4.68 months inventory on the market for houses. Some people don’t think this shows an extraordinary supply vs. demand, although it certainly provides a much better opportunity for buyers to see what’s on the market and having some time to think it over before making an offer. With 76 condos (not including lofts or own-your-owns), on the other hand, at an average price of over $581,000, there is almost a 7 month supply in the same area. Still a great buy for buyers to be near the ocean in an area where a house would be unaffordable for them. Search properties at http://www.juliahuntsman.com.

Break for Borrowers

The Federal Reserve has once again left the rates alone, and "judges that some inflation risks remain." The prime lending rate remains at 8.25 percent, breaking the string of 17 rate hikes that has driven the funds rate to its highest level in more than five years. Mortgage rates have actually fallen this year from it's high of 6.8 percent on a 30-year fixed: so it's still a great time to refinance or purchase!

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.

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.

Federal Reserve: No Changes for Now

After 24 increases in the federal funds interest rate, the Federal Reserve holds off on further increases this week. There may be more increases in the future, but the cooling in the housing market and moderated economic growth are the current reasons cited for no further hikes at this time.

Rent vs. Buy: Buying Is Better

According to the National Association of Reators, the Federal Reserve Board estimates that homeowners have a net worth nearly 36 times more than that of renters. Over the past 10 years, the cost of rental housing in the United States has increased an average of 3 percent per year; average rents are projected to rise 4.1 percent this year alone. With a 3 percent annual increase, a current rental payment of $1,000 per month would increase every year and amount to $137,567 after 10 years, with no wealth accumulation.

In contrast, a $210,000 home purchased today with a downpayment of $10,000 and a 30-year fixed rate mortgage at 6.5 percent would cost a steady $1,100 per month and yield a net worth of $138,521 after 10 years, assuming an historic 4.5 percent annual appreciation rate.

Current Housing Price Picture

Just lately there's been a lot of media focus on the condo prices, i.e., they're falling, but if you read closely, the articles are about certain markets. Condos closer to the coastline in Long Beach are anywhere from $300,000 up to $1,000,000 plus. With the slower market, buyers and sellers are each hugging their own trees, waiting for other's to fall down first. Condo conversions are in oversupply in some markets, but in the coastal areas of Long Beach, condos are still an entry level home buy for otherwise expensive single family neighborhoods. As Kenneth Harney says here, "scour the market for properties that may never be cheaper, or even available."

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."

The UCLA Anderson Forecast: No Recession

Buyers and sellers seem to be in a kind of standoff this summer--buyers are waiting for real estate home prices to fall and sellers are just waiting for an offer. More than a month ago, UCLA discussed its national and California forecasts, and for both, certain declines in real estate and jobs are present in certain sectors, "but absent job losses in manufacturing or other sectors, there will be no recession," according to economist Ryan Ratcliff. Anderson Forecast director Edward Leamer, "does not expect real estate prices to fall significantly, notes that sales volume is what typically drops, and drops more precipitously than prices, as the price cycle lags behind the volume cycle," which is what we are seeing on the market now, as Southern California sales volumes (although higher in June than April and May) lag behind last year's, the median price remains strong. http://www.juliahuntsman.com

Rent Increases in State Outpace Much of the West

Average rents in Orange County and Los Angeles County range from $1400 to $1600 a month, and may increase approximately 6% this year. A strong economy is one of the reasons, but the conversation of over 11,000 apartments into condos is another. In recent years low interest rates allowed many renters to become homeowners so rents were not raised, but now with home prices and interest rates rising, renters are stalled as landlords raise rents to match the current market. And until more multidwelling units are constructed, a shortgage of rental units allows some landlords to play catch-up to the tune of rent increases of several hundred dollars a month.

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.

Drop in Interest Rates

The average 30-year fixed mortgage rate fell from 6.79% to 6.74% over the seven-day period ended July 13, the first time in five weeks the rate has declined, according to Freddie Mac's Primary Mortgage Market Survey. The average 15-year fixed mortgage rate fell from 6.44% to 6.37%, the average rate for five-year Treasury-indexed hybrid adjustable-rate mortgages declined from 6.39% to 6.33%, and the average rate for one-year Treasury-indexed ARMs decreased from 5.82% to 5.75%, Freddie Mac reported.
Fees and points averaged 0.6 of a point for 30-year fixed-rate mortgages and one-year ARMs, 0.4 of a point for 15-year fixed-rate mortgages, and 0.5 of a point for hybrid ARMs. 'June's employment report caught financial markets off guard,' said Frank Nothaft, Freddie Mac's chief economist. 'In response, long-term bond yields eased a bit this week.' A year ago, the average 30-year and 15-year fixed rates were 5.66% and 5.25%, respectively, and the average one-year ARM rate was 4.39%, Freddie Mac said. "

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).

Cooling Home Market Spurs Interest in Foreclosure Sales

With a slowing in the market, perhaps a stabilizing in the real estate market, foreclosures seem to have a little more allure. But there are things to know: websites listing foreclosures may be out of date, or may list properties that haven't yet met all the legal requirements for sale. In other words, approach foreclosure properties and foreclosure websites with care. Just because it's listed on a website doesn't mean the property will actually sell; and if a buyer does purchase at auction there are significant risks involved. The thought that a foreclosure property can be bought below market doesn't work out that way, because if a bank finally takes it back after completing the foreclosure process, those properties are usually listed at market. Why would the bank sell for less? Read the Wall Street Journal article for their complete story on investigating this sector of real estate sales.

Inman News reports that the Federal Reserve's recent tone hinting at possibly no further rate increases may have changed after its June 29 statement. 10-year Treasury note rates declined, so did mortgage rates which closely follow the Treasury notes and yields on long-term government bonds. Later positive predictions of June job growth may have the effect, though, of another increase in August by the Federal Reserve, which will ultimately impact the mortgage rates. Be prepared.

I've had to reconstruct the blog. Previous links and features will be added again.

Why the Housing Boom Will Stay

Harvard University's Joint Center for Housing Studies points out the main pillars of the housing market in its 2006 report, where downturns in the market will not outweigh the long term factors:

Several factors are at work.

Booming household growth. The nation will add 1.37 million new households this year. Part of this is natural population increase but this has also been bolstered by foreign migrants.

Graying boomers. As boomers have aged and prospered, they have begun to buy vacation or second homes in increasing numbers. This trend will widen as they near retirement.

Changing household composition. Social and cultural changes add to the number of households. There are more single-person households than in the past. Fewer adult children live with their parents; they establish their own homes. Increases in divorce rates result in the division of multi-person households into smaller ones. Family sizes have shrunk; a community may have about the same population but more households.

Minority gains. Ownership among formerly under-represented minorities has increased. Black and Latin home ownership has always trailed that of whites but the past 10 years has seen minorities making great progress.

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."

Federal Reserve Increases Rate

Fed raises key interest rate to 5.25% in 17th consecutive increase on fears of inflation risks. The recent increases in bank mortgage rates areprobably a reflection of this anticipated increase, following pastpatterns."Recent indicators suggest that economic growth is moderating from itsquite strong pace earlier this year, partly reflecting a gradual coolingof the housing market and the lagged effects of increases in interestrates and energy prices," according to a committee statement."Readings on core inflation have been elevated in recent months," thecommittee stated. "Ongoing productivity gains have held down the rise inunit labor costs, and inflation expectations remain contained. However,the high levels of resource utilization and of the prices of energy andother commodities have the potential to sustain inflation pressures."In a related action, the Federal Reserve Board of Governors unanimouslyapproved a 25-basis-point increase in the discount rate to 6.25 percent. See my site at http://www.juliahuntsman.com.