Thursday, December 29, 2005

Real Estate News for Thursday, December 29th, 2005

California real estate prices expected to rise 10% next year. Realtor group forecast also calls for slight dip in sales. Sales of detached, existing single-family homes are expected to reach 635,000 in 2005, an increase of 1.8 percent over last year's record sales of 624,700. Sales are anticipated to decline by 2 percent in 2006. This year will be a record year for home prices. The median price of a single-family home in California crossed the $500,000 threshold for the first time in April 2005. The annual median is expected to reach $523,150 in 2005 and increase 10 percent to $573,500 in 2006. The median price of a single-family home increased by double-digits for the fourth consecutive year in 2005, though the pace of price appreciation slowed from the 18 to 21 percent annual gains of the previous three years to 16 percent in 2005. CAR's Unsold Inventory Index averaged 3.3 months in 2005. Inventory levels are expected to rise moderately in 2006 but will remain low by historic standards, fueling continued price appreciation in the California market, according to the association's forecast. The interest rate for a fixed-rate mortgage remained below 6 percent for much of 2005, only surpassing 6 percent in the last months of the year. For all of 2005, the fixed-rate mortgage averaged 5.8 percent. In 2006, the interest rate for the FRM is projected to increase but remain low by historic standards in the low- to mid-6 percent range. The interest rate for a one-year adjustable-rate mortgage averaged 4.5 percent in 2005, finishing just over 5 percent at year-end. The interest rate for the one-year adjustable-rate mortgage is expected to remain within the low- to mid-5 percent range during 2006. With home prices reaching record levels, more home buyers extended themselves financially in 2005 by utilizing alternative loan products. The share of home buyers who used adjustable-rate and hybrid loans increased from 11 percent in 2003 to 43 percent in 2005, while the share of fixed-rate loans dropped from 89 percent in 2003 to 57 percent in 2005. The last time more than 40 percent of home buyers used adjustable-rate loans was in 1994. Fannie Mae and Freddie Mac increased the single-family conforming mortgage loan limit from $359,650 this year to $417,000 in 2006, which could benefit more than 28,590 families in California. However, the increase in the loan limit is still far too low to benefit most home buyers in California, as the median price of a home in California is 29 percent higher than the new loan limits. Nineteen counties in California have a median home price above the new limit. Internet use by home buyers and sellers continued to climb in 2005. Based on CAR's "Internet Versus Traditional Buyers Survey," the percentage of home buyers using the Internet increased from 56 percent in 2004 to 62 percent in 2005. The share of sellers who used the Internet in their home-selling process surpassed 50 percent for the first time, rising from 47 percent in 2004 to 57 percent in 2005, according to CAR's "Survey of California Home Sellers." Click here to read more.

A buyers' market in real estate: What's that? The nation's housing market is cooling enough that some power might actually be shifting to buyers, the National Association of Realtors reported today. Sales of existing homes dropped 1.7 percent in November compared with the month before to a seasonally adjusted annual rate of 6.97 million, the association said. The number of homes available for sale jumped 1.2 percent to 2.9 million, the highest level since April 1986, and a five-month supply at the current sales pace. "As more listings of homes come on the market during this period of modestly declining sales, more home buyers will find themselves in a better position to negotiate," Thomas Stevens, the association's president, said in a statement. "Most home sellers will see excellent returns on their investment, but should understand that double-digit annual increases will become less common in the coming year," Stevens said. Click here to read more.

Twenty Years Later, Buying a House Is Less of a Bite. Despite a widespread sense that real estate has never been more expensive, families in the vast majority of the country can still buy a house for a smaller share of their income than they could have a generation ago. A sharp fall in mortgage rates since the early 1980's, a decline in mortgage fees and a rise in incomes have more than made up for rising house prices in almost every place outside of New York, Washington, Miami and along the coast in California. These often-overlooked changes are a major reason that most economists do not expect a broad drop in prices in 2006, even though many once-booming markets on the coasts have started weakening. The long-term decline in housing costs also helps explain why the homeownership rate remains near a record of almost 69 percent, up from 65 percent a decade ago. Nationwide, a family earning the median income - the exact middle of all incomes - would have to spend 22 percent of its pretax pay this year on mortgage payments to buy the median-priced house, according to an analysis by Moody's Economy.com, a research company. The share has increased since 1998, when it hit a low of 17 percent before house prices began rising sharply in many places. Although the overall level has reached its highest point since 1989, it remains well below the levels of the early 1980's, when it topped 30 percent. Click here to read more.

~Tina Jan~
Coldwell Banker Kivett-Teeters
1655 E. Sixth St.
Beaumont, CA 92223
Work: 951-845-5520 Ext. 105
Fax: 951-845-4916
Cell: 909-446-2666
Toll-Free: 1-877-TINAJAN
tina.jan@coldwellbanker.com
www.tinajan.com

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