California offers most bubble markets, but still far from busting

"Even in the highest-flying markets", such as California, the LATimes.com is reporting, "it would take four straight quarters of economic recession — rising unemployment, flat or declining household incomes — to precipitate a housing price bust. And not one of the 27 has yet racked up even one quarter of recession, Youngblood says. Any serious housing price deflation — if indeed it is in the cards — is unlikely for at least a year."

The article does point out that double digit gains will not continue, almost under any circumstances.

Ultimately, home prices in Southern California should continually slow in appreciation, but not lose value any time soon.

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Housing Permits Increase 8% in California in 2004

"California housing permits rose nearly 8% last year to surpass 200,000 for the first time in 15 years, yet the rate of growth is expected to stall this year, industry experts said Thursday", the LATimes is reporting.

Last year, the Inland Empire and Los Angeles County lead the state in housing starts.

"Production of 210,000 units is strong evidence of the confidence in the state's economy as well as the demand for ownership homes and condominiums," said Alan Nevin, chief economist for the California Building Industry Assn., a trade group.

Yet Nevin expects about the same number of permits to be issued this year. "Builders are having a difficult time getting lots for single-family homes," he said.

Other economists forecast a construction slowdown because high housing prices are damping demand. For example, in Ventura and Orange counties — where median home prices exceed $500,000 — starts for single-family units declined 24% and 23%, respectively.

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Mortgage Broker's Association - No national housing bubble

"There is no national bubble. We're sort of calling it the 'Don Ho' phenomenon, where there are Tiny Bubbles," said Doug Duncan, the Mortgage Broker Association's chief economist. Rising interest rates will put a brake on home sales in coming years, but steady economic growth and low unemployment should keep housing prices from slipping, a forecast said Thursday.

Click here for the complete article on CNNMoney.com

Bubble expert, Shiller, talks about real estate

According to Money, Yale economist Robert Shiller worried about stocks in 2000. Now he's worried about real estate, arguing that housing in many cities is undergoing the same irrational exuberance as stocks did in their bubble days.

Click here for the complete Money real estate story.

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Nationwide, mortgage activity AND rates are down

With mortgage rates continuing to drop, one might expect a surge in mortgages.

Last week, the average mortgage rate was 5.58%, the lowest level since October 2004, but mortgage applications were yet down again.

Of course, such data always ensures real estate bubble talk. Overall, most analysts think the market is relatively stable.

"I attribute the spike in refinance applications over the last two weeks to continued low interest rates and a build up created by the inactivity of the holiday season," said Neil B. Garfinkel, Esq., a lawyer at a New York-based real estate law firm. (Read more on this Reuter's story)

California Realtors See Strong 2005

The California Assn. of Realtors predicted another strong year for the real estate market, with the state's median home price slated to rise 5.6%, reported the LATimes.com

Of course, it still comes down to interest rates - how far and fast they rise.

It has become almost accepted as fact that rates will rise this year, probably close to 7 percent. That increase will make Los Angeles and most of Southern California unaffordable for the far majority of residents.

Nonetheless, homes are expected to appreciate in price by almost 6 percent. While considerably lower than the double digit gains of last year, such a gain would still be historically high.

Many analysts and economists seem to believe that if the economy can strengthen, most California real estate markets might continue to appreciate, just at a slower pace.

Read more on this California real estate news story by click here.

How Affordable is Real Estate in Los Angeles and Southern California?

According to an article by the LATimes, Not as Bad as it Sounds?, "Though affordability in Southern California looks bleak, the way the numbers are reported may contribute to creating such a dismal picture."

The article points out that income-to-debt ratio changes, as well as ARM loans, have changed the affordability factor in a way this isn't measured. Still, even using this new measure, the affordability factor only increases by about 10 percentage points.

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Downtown Los Angeles Hot Real Estate Market?

A special report on CNBC reported that one of the hottest real estate markets in America is downtown Los Angeles.

Anchored by the Staples Center and the new Disney Concert Hall, residential units in downtown Los Angeles have doubled from 1999 to 2005, with significant new developments both underway and planned.

All of the residential activity and a multibillion dollar development around the Staples Center has brought something very rare to downtown - a major grocery store. Ralphs has announced plans to open up a store to service the downtown residential community.

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Mortgage rates decline 3rd week in a row

Mortgage rates decline 3rd week in a row on 30-year fixed-rate mortgages.

Low mortgage rates are what the majority of real estate analysts and economists attribute the California real estate rush to, and as those rates continue to remain low, housing prices will almost certainly will continue to appreciate by double-digit gains.

Thursday's weekly survey by mortgage company Freddie Mac showed that 30-year, fixed rate mortgages averaged 5.67 percent for the week ending Jan. 20, compared with 5.74 percent last week.

15-year, fixed-rate mortgages, a popular option for refinancing, declined this week to 5.15 percent.

Five-year hybrid adjustable rate mortgages averaged 5.05 percent this week.

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SoCal real estate market might cool, just not yet

Applications for home mortgages increased in the last week ending January 14.

Mortgage industry analysts say consumers are still taking advantage of low rates to purchase homes and refinance mortgages on their homes. According to industry reports, fixed 30-year mortgage rates averaged 5.64 percent last week, and 5.7 percent the previous week.

Los Angeles real estate has shown some signs of stabalizing, as has Orange County, but the Inland Empire continues to be a real hot spot.

Nonetheless, the overall Southern California real estate market keeps moving forward, and until mortgage rates go up, that trend will probably continue for the next several months, minimally.

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Southern California Real Estate Bubble? Prices up in December

While California real estate bubble talk goes on, the areas real estate prices continue to rise.

The median price paid for a home in December in Southern California last month rose 22.5% from last year to a record $424,000, according to real estate firm DataQuick Information Systems.

"The big question now is whether the cycle will play itself out in 2005 with a soft landing or with a turbulent crunch," said Marshall Prentice, DataQuick's president. "Right now, the soft-landing scenario appears the most likely."

Median price Los Angeles County home prices rose 21.2% to $418,000 from last year. In Orange County, the December median gained 18% to $551,000 and was up less than 2% from November's $541,000, according to real estate firm DataQuick.

Inland Empire home prices surged 36.4% to $371,000 from a year earlier.

San Bernardino County's median jumped 30.7% to $281,000.

Ventura County saw its median price rise 26.1% to $522,000 in December.

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Mortgage rates drop to start the year

Freddie Mac's weekly survey, ending January 6, showed the average 30-year fixed rate mortgage was 5.77, down from 5.81 a week ago.

Last year finished off the year with an average 30-year fixed mortgage of 5.84 percent.

Analysts are still split on the future of mortgage rates for 2005, though the consensus seems to be building that next year will be another great year for the real estate industry.

Most analysts; however, do expect mortgage rates to rise sometime next year. Most expect the first quarter of 2005 to hold under 6 percent. By the end of year, the most common guess is 6.5% - 7.0%.

Other mortgage rates

15-year, fixed-rate mortgages, dropped this week to 5.21 percent, from 5.23 percent last week. One-year adjustable-rate mortgages fell to 4.10 percent this week, from 4.19 percent.

Five-year, “hybrid” adjustable- rate mortgages averaged 5.03 percent this week. This is the first time Freddy Mac has monitored this rate.

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Mortgage applications down last week.

Due to shortened week, most analysts agree, mortgage applications were down last week, even though mortgage rates actually dropped.

Fixed 30-year mortgage rates averaged 5.67 percent last week, down points from 5.72 percent the week before.

Refinancings, down significantly this year, made up 48 percent of all mortgage applications last week, up from 46.2 percent last week.

One-year adjustable-rate mortgage rates averaged 4.17 percent, up 12 points from the previous week.

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Want to buy, but worried about the housing bubble?

You're not the only one.

With homes appreciating by 20% or more per year in much of Southern California, even with historically low mortgage rates, most houses are out of reach for the majority.

Still, homeownership is a significant step towards financial security. Therefore, many worry that if they don't buy now, they might not ever be able to buy.

Even if the appreciation portion of the real estate bubble bursts to low, single digit gains per year, while home prices remain stable and interest rates rise, it will become even harder to buy a home.

Of course, maybe prices will recede buy 20% or more within the next couple of years.

No one really knows.

One of the main ways many real estate investors try to keep some measure of home values is by knowing the rent those homes command. Obviously, if the house can demand a rent that would pay for itself, then you are doing pretty good.

While rents in Los Angeles and throughout Southern California having been rising, in most areas it is cheaper to rent than to own. How significant this difference is should provide some indication of the real value of the house.

Of course this isn't a perfect system, and there are always other variables to consider.

For example, building codes in most areas of Southern California have severely limited new housing in the area, as immigration continues to rise.

So where will everyone live? If this continues, won't this have an effect on rents?

The important thing to remember about real estate, or purchasing a home, is to focus on the long term, according to most real estate analysts. Sure, quick money can be made, but it can be lost just as quickly.

Historically, real estate rises in value. You might have to wait five or ten years, but if you can make your purchases, knowing that you can stay put for at least five years without going into debt, then you should always be in good shape.

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