Reply With QuoteYou gotta love an article that starts with one opinion and then gives you another one in the end. Southern Cali is and will continue to grow period. Too many people want to live here.
"Home-price growth seen slowest since '70s"
Fed estimates only 2.6 percent rise over next 3 years
by The Associated Press
July 14, 2004
WASHINGTON - U.S. house prices are likely to grow at the slowest pace in more than three decades as interest rates climb and land prices take a tumble over the next three years, researchers at the Federal Reserve have estimated in a new study.
The study, published on the central bank's Web site recently, asserts that if U.S. disposable income and short-term interest rates climb as much as Wall Street expects them to, nominal existing-house prices would increase a cumulative 2.6 percent over the next three years. That would mark the lowest rate since the government began keeping records in 1970. The number implies high odds that house prices will decline in inflation-adjusted terms.
The conclusions validate the unease of many private economists who fear the U.S. housing market, having benefited recently from rapid price gains that helped maintain strong consumer spending through a recession, may become a source of economic instability as interest rates climb.
Prices of existing homes rose by more than 20 percent cumulatively over the last three years, according to the National Association of Realtors. The association has been predicting only a modest slowdown for the next few years.
"Of primary concern to some analysts is whether the recent run-up in aggregate home prices will be somewhat reversed, much like the 1985-90 and
1990-1995 experience," when inflation-adjusted house prices declined in several major metropolitan areas, write the authors of the Fed study, Morris Davis and Jonathan Heathcote. Davis is a Fed economist; Heathcote is an assistant professor of economics at Georgetown University.
They conclude a reversal of those magnitudes involving land-price declines of as much as 10 percent is likely.
The NAR disagreed with that assessment. "The (house-price) number is just unreasonably low and doesn't match up with the underlying factors, such as the tight supply conditions and very low mortgage rates," said Lawrence Yun, the association's senior economist. He said consumer spending would slow "if that report is correct, and there is a very minimal return that people can expect" from house purchases. The association's own forecasts call for nominal house prices to rise about 15 percent over the next three years.
Fed policy makers have generally rejected the view of commentators who argue that rising U.S. house prices have created a "bubble" in the market that could destabilize the economy if it bursts. The rise of house prices, Fed Chairman Alan Greenspan and other officials have said, is bound to slow as interest rates climb. But they said a destabilizing drop in prices isn't likely.
"Some factors, including increasing prosperity and wealth associated in part with rapid gains in labor productivity and earning power, should help support house prices in the future and thereby reduce the risk of a sizable correction in which prices actually fall across a large number of localities," Fed Governor Donald Kohn said in a speech in April.
The Fed researchers said they studied the question by using data from government-sponsored mortgage giant Freddie Mac, the Census Bureau and the Bureau of Economic Analysis to construct a quality-adjusted price index for the stock of residential land in the United States. They found the formula they developed would have broadly predicted the actual changes in the market values of homes recorded in Census data over the last 20 years.
You gotta love an article that starts with one opinion and then gives you another one in the end. Southern Cali is and will continue to grow period. Too many people want to live here.
Originally posted by welk2party
Southern Cali is and will continue to grow period. Too many people want to live here.
And those of us that can't afford to buy a home will continue to be priced out of the market.
Originally posted by Havasu_Dreamin
And those of us that can't afford to buy a home will continue to be priced out of the market.
Depending on where you want to live. There are affordable places to be had. The Inland Empire will be grwoing like Orange County for the next 15 years. You can buy a home in some areas for the low 200's right now.
Originally posted by welk2party
Depending on where you want to live. There are affordable places to be had. The Inland Empire will be grwoing like Orange County for the next 15 years. You can buy a home in some areas for the low 200's right now.
Yes, very true, but when you have a well paying job in the San Gabriel Valley, that you like no less, living in Riverside or Beaumont long-term is not an attractive option. Just about the furthest East I'd like to commute to my job from is Rancho Cucamonga and that is still 40 miles and is up there in price now.
Exactly what I was expecting.... yet to be noticable though...
The prices are not favorable for people that are rooted already. But the Inland Empire is affordable and business is starting to arrive for jobs. People just moving here are likely to move there for obvious reasons. I sell land in this area and the growth is amazing. My clients are making a bundle!
Originally posted by welk2party
You gotta love an article that starts with one opinion and then gives you another one in the end. Southern Cali is and will continue to grow period. Too many people want to live here.
Real estate is a cyclical market, as are most markets that I'm aware of.
It's all basic supply and demand.
I bought my house in 1998 for $100k less than the previous owner owed on it when it was repossessed! He refi'd in 94 or 95.
I reckon the real estate market goes in about 7 or 8 year cycles, and I predict a market correction in 2005. I have said so for years.
In the long run, you can't lose with real estate, you just have to have deep enough pockets to be in it for the long run.
All these poor folks that are cashing out all the equity in their home, living beyond their means and earning just enough to pay thier debt service are building their castles on sand.
Don't people understand that when you refinance your house, you're just borrowing money? Sheesh!
Who wants to pay more and more interest? Not me!
Thanks
CA Stu
PS The opinion expressed above is that of a 909 High School Graduate.
Originally posted by CA Stu
PS The opinion expressed above is that of a 909 High School Graduate.
ROFLMAO!
Santa Clarita has trippled its inventory in the last 90 days. It is a good thing for buyers. Price reductions are here and commisions are up. We've sold five homes this week. We are hoping its just a wierd lul in the market!
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