Don't Fear Falling Home Prices

If we keep our income at current levels and home prices go down, we are actually richer; we can buy more housing for the same dollar, and for a smaller portion of our disposable income. So, what's wrong with falling prices? I believe there is a misconception that houses will always appreciate. Sometimes people will imagine that it is possible to have continuously rising home values and affordable housing. The problem is that the two don't happen at the same time! Some say "life just isn't fair," and they are probably right. Even so, you either get high home prices or low home prices. And I happen to think that lower home prices are what we all really want, and therefor shouldn't be afraid of lower prices. Most of us care about our children and grandchildren, and want them to be able to buy affordable homes. Why would we want high prices? What I want is economic growth and reasonble appreciation that keeps me ahead of inflation. If we can get through the mortgage and subprime problems with fewer casualties, that will be wonderful; but, I fear there will be many casualties inspite of anything the Fed might do. When all the proverbial dust settles, I think we will get back to affordability in most of our neighborhoods, and that will be good for all of us.

Is Orange County Real Estate Really That Bad?

Read local newspapers, watch TV, listen to the radio and what do you find? The drum beats would lead most people to conclude that O.C. real estate is in the tank; or, soon to be. This week I thought I'd test that hypothesis and see what has happened since January 2005 in the market for homes priced below $1 Million. What I found was interesting to say the least. I looked at Days on Market for sold homes, average sale price, number of homes for sale, and total sales. Here's what unfolded:

January 2008 compared to January 2005

* Sold homes were on the market an average of 85 days; nearly 29% longer than in 2005

* The average sale price was $448,640; which was down 10.5% from 2005

* Number of homes for sale was 15,583; 126% more than in 2005

* Number of sales was 925; down 63.6% from 2005


Heres what I make of the data: In three years, prices have only receded about 11%. Does this mean sales are in the tank, or just a bit damp? The other measures make perfectly good sense. More homes and fewer sales will naturally extend time on market. Fewer buyers in the market place due to tighter money and less appreciation means fewer sales. I ask you; is it really all that bad? Let me hear your opinions on this. View a brief video from this link http://www.youtube.com/watch?v=IN8lhrlqmC8

Market Matters

Here's some good info to help you keep recent market events in perspective:

1. The main constraint on real estate activity is the lack of funds available for less than best qualified buyers. That means at least 35% of the buyers are out of the market!
2. Historically, mortgage rates for Jumbo loans were only 0.2 to 0.4% higher than conventional loans. Now the difference is as much as 1.2% Ugh!
2. There is a dearth of qualified buyers.
3. The Senate passed the Stimulus Package which, if signed by the President, will raise the conforming loan limits in high cost states such as California. This is good news!!
4. Days on market for homes has risen from 67.2 days to 72.1 days. Not bad!
5. The inventory today in Orange County is over 9 months. If no new listings come on the market, it will take at least 9 months to deplete all that inventory.