More and more use ARMs to purchase homes

The Mortgage Banker's Association is reporting that 36% of mortgages last week used an adjustable rate, the highest rate ever for Adjustable Rate Mortgages, or ARMs.

Some economists worry that the use of adjustable rates could come back to haunt consumers, already stretched to make home purchases. However, as the cost of real estate has risen, so to has the use of adjustable rates, and the prospect of an increased rate of defaulted loans is anticipated by some market watchers.

Most ARMs usually offer a significantly lower rate than a typical 30-year, fixed-rate mortgage, but it is only fixed from 1 to 7 years. After that, the rate becomes variable, and could result in an ever-increasing rate of interest.

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Rising rates or not, home sales still cooking

Amid rising rates, the Mortgage Bankers Association reported that, overall, mortgages were up 2.4% last week.

The average 30 year fixed mortgage rate is at 6.08, up slightly from the previous week.

Most analysts are predicting steady behavior from the real estate market, as well as well as from mortgage rates. Some are waiting to see what affect the variable rates of maturing ARM loans will have on the significant percentage of mortgage customers that used such funding in recent years.

For those waiting to buy real estate once the market crashes, you might be waiting for some time. Expect appreciation to definitely slow, even idle in some places, but don't expect much movement in home prices - at least not in the near term it appears. Rising home prices, like rising mortgage rates, appears to be the trend.

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Real Estate versus stocks, which is a better investment today

That was the discussion that just finished on CNBC. While experts disagreed as to whether real estate or stocks was the better investment today, both sides felt that the fundamentals behind the real estate market are still strong and will be for some time. Yes, there is some speculation, but overall there is no big bubble. Double rates of appreciation will end, but expecting 5% gains per year isn't unrealistic.

Bubble, bubble, bubble trouble?

I was watching CNBC this morning and the general feeling regarding real estate right now seems to parallel that of the general economy, caution. Many analysts are still predicting a real estate bubble, most often citing rising interest rates as a possible pin. The strength of the burst draws the most contention, with most predicting the stabilization of home prices or single-digit rates of appreciation. Others feel that if real estate cools, the economy could chill significantly, and real estate predictions then become much more dire.

One thing is clear, however, bubble talk is going to be an integral piece of every day's financial news for the next couple of quarters.

For more on mortgage rates and the real estate bubble, check out the article, Higher Mortgage Rates May Cool Home Market. The gist of the AP is "Rising mortgage rates will cool but not crush a national housing market that is still relatively hot, one of the economy's consistently good performers."

New home sales beat estimates

On the same day that two reports came out showing that mortgage rates have risen above 6.0, another report showing new home sales were up 9.4%, the highest gain since 2000, shocked the financial world. More important, analysts noted that sales to inventory numbers still indicate that demand is much stronger than supply.

Some analysts warn this might be a last gasp for those wanting to take advantage of low rates before they are gone. Still, the numbers are very surprising to most real estate market analysts. The idea that immigration and a demographic shift might keep the real estate market going a while longer is gaining ground.

Rising mortgage rates and Southern California real estate

Southern California home prices have had 13 consecutive months of year-over-year gains of 20% or more. Much of this run-up has been caused largely by two things: moving money from stocks into real estate, and low interest rates.

So, what will happen as rates rise?

By the end of this year 30-year mortgage rates are expected to rise to between 6.4 - 7.0 percent. This would make homes in Los Angeles and Southern California even more unaffordable and further limit the pool of potential home buyers. Many analysts feel this would push home prices down.

Even optimists admit that double digit gains cannot be sustained with rising interest rates. In their opinion, home prices won't really decrease, but appreciation will be limited more closely to the rate of inflation. Of course, if rates increase unexpectedly, all bets are off.

Additionally, increasing rates could have a significant impact on recent homebuyers that have utilized variable rate loans in order to 'afford' their real estate purchase. This could increase foreclosures and also push home prices down.

So, do you wait for higher mortgage rates to force prices lower, or do you take advantage of low interest rates and hope that the real estate market doesn't pop?

That's a very good question.

Real estate investing in a second home?

Are you interested in purchasing a second home, or some other investment property? If so, there are several things that need to be considered. While the current real estate market is not the same as the technology bubble, there are similarities, and there are definitely things you can do to hedge your bets. Real strategies for a surreal market covers 5 things to do before buying a second home.

Real Estate driving California economy?

"Earlier this week, the UCLA Anderson Forecast estimated that half of the private-sector jobs created in California in the last two years were connected in some way to real estate. A cooling housing market, Christopher Thornberg, a senior economist with the Anderson Forecast team at UCLA, warned, could easily stifle the state's economic expansion," according to the LATimes.

Thus, if the California real estate market cools significantly, it could also affect many jobs, causing further economic problems. Moreover, rather than just cooling the market, it could help 'pop' the so-called California real estate bubble.

Nonetheless, there were also signs that technology jobs are also picking up, which is especially important for California's economy. If job creation, outside of real estate, can grow, the California economy should be in good shape.

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'Cheaper' Southern California real estate very hot

Overall, Los Angeles County is not appreciating as much as counties in the Inland Empire. The high cost of homes near the Ocean has pushed investors and buyers further inland, where real estate is significantly cheaper.

According to a recent study of zip code sampling and real estate sales, a similar trend is also occurring within Los Angeles County. Areas like Lincoln Park, El Monte, even Compton, are experiencing huge increases in home value appreciation, while Beverly Hills and Pasadena appreciation has slowed.

Real estate analysts believe this fragmentation will be the trend for the Southern California real estate market - lots of mini-markets. While Glendale might slow, a few miles down the road, Glassel Park home sales might explode. One block might appreciate, as an adjacent block depreciates.

More on this story from the LATimes.

What does real estate bubble mean?

Bubble, bubble, bubble. The Internet bubble has burned 'bubble' into the minds of many Americans, and all investors. As real estate has become an exceedingly popular investment tool and stock money has been diverted into real estate, so to has the word bubble become exceedingly popular as a description of real estate.

The Internet bubble was built on irrational exuberance, many analysts have stated. Companies with little more than a business plan were suddenly receiving millions of dollars in funding to be the first to market, yet the market wasn't big enough for everyone trying to get there.

While the housing market, or the real estate market in general, is showing signs of exuberance, is it completely irrational?

Homes and real estate have value, it's not about being first to market. Real estate has long term value as an asset. A bankrupt company built mostly on paper with few tangible assets, doesn't have much long term value.

Home values in Los Angeles have risen more than 50% in just the last two years, and much of California has seen the same. Analysts throughout the country call this the great California real estate bubble.

Yet, if one studies population trends, California is certain to become more populated. More important, expansion is nearing its limits - at least outward expansion. Instead, much like other major metropolitan areas, California will have to build upward - something that really hasn't been done, particularly in Southern California.

Thus, ultimately, real estate should have much better long term investment value than Internet bubble casualties. When push comes to shove, the Internet is an apple, while real estate is an orange.

There is a lot of exuberance in the real estate market, but it is far less irrational than the Internet bubble.

Southern California home price surge in February

The median cost of Southern California homes is up more than 21%, to $425,000 over the same time last year, according to DataQuick Information Systems.

The Inland Empire, Riverside and San Bernardino counties, experienced the highest gains, as those unable to afford housing towards the coast move inland - as do real estate investors.

Orange County slowed to an almost 17% increase, Ventura County 18%, and Los Angeles County came in at 20.5%.

Overall, housing inventories are higher than last year, but very low historically. According to some experts, this is because there are many homeowners in Southern California that would like to sell, but that don't want to buy another house in the current market.

The crazy California real estate market continues.

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The pin to pop the California real estate bubble?

30-year mortgage rates hit their highest level in seven months, according to Freddie Mac. It was the fourth straight month that interest rates have risen, and it's the highest rates have gone in 7 months.

According to an MSNBC article, "Analysts said that last week's good news on employment, showing that the economy created more than a quarter-million jobs in February raised worries in financial markets about possible future inflation caused by stronger-than-expected economic growth."

Is the game up? Historically low mortgage rates have created a real estate bubble in California, according to some analysts. Rates going up, might just be the pin to pop the bubble.

Real estate still hot in 2005 - as long as rates low

Real estate should still remain hot this year, according to a report released Wednesday by PNC Real Estate Finance. That is, as long as interest rates remain low. More from CNNMONEY.

Los Angeles real estate prices flattening?

Title insurer First American Corp. is comparing the recent run-up in the region's home prices to previous cycles and concluded that prices today could be at or near a peak.

In a study of 116 U.S. metropolitan real estate markets, Christopher Cagan, an economist for First American Corp. found that the Southern California market typically runs in eight-to-14-year cycles. Cagain believes Southern California has been in an upcycle since 1998, and is reflective of price jumps similar to the late '80s.

Then the market not only flattened, but depreciated as much 25%. Cagan doesn't expect a repeat of that kind of loss. Instead, much like most real estate analysts, he sees slowed, mostly single-digit appreciation, or depreciation, in most Southern California neighborhoods.