California Mortgage News
Monday, July 04, 2005
"Bubble? What bubble?
Economists have been predicting the end of California's housing boom for months, but the California Association of Realtors said this week that prices and sales will reach record levels in the second half of 2005.
In its mid-year housing forecast, CAR predicted that existing single-family home sales will reach 633,490 units this year, a 1.4 percent increase from last year's record of 624,740 units."
First off a little basic statistics here. In a pool of 630,000 items, a difference of 9,000 is not significant. Furthermore this is a prediction by an entity that has a interest in continuing to make sure the housing boom and housing prices stay high. Look at the source. Additionally 30 year fixeds are nearly a point lower than they were last year. This means despite a drop of 1% in interest rates, total sales are predicted to remain flat (as 9,000 homes out of a pool of 630,000 sold). That's more telling. Each drop in interest should correlate to a 10-15% increase in home sales (at least that's what it meant traditionally).
A little daylight begins to creep into the article as Jack Keyser from Los Angeles County Economic Development Corp.," says buyers are starting to dig in a little.
"We're seeing more and more signs of buyer resistance to prices,' he said. "And we're hearing the regulators growling at lenders to be a little more cautious about some of the loans they're making.'
Kyser pointed out a serious anomaly in the market.
"Ordinarily, with the market as strong as it is, with demand as high as it is, you would see builders rushing to get more homes on the market,' he said. "But it's not happening. We're not building enough new homes, especially in the affordable sector.'"
Good point. At the current prices roughly 17% of Californians can afford to buy a home in the state. The boom cannot be sustained. I on the other hand do not predict a sudden deflation in California ala 1987 (remember that folks? Remember when every one was upside down on their homes? A slow sliding back down a more sustainable level as interest rates slowly rise. I suspect the fed will stop raising around 5.5%.
Labels: CaliforniaAssociationofRealtors, californiahomeprice, californiahousingprices, californiamortgage, CAR, Whittier
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Labels: californiamortgage, greenaccount, Mortgage, PacificTrustBank
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