Want to buy a home? Wait about 3 months

Some say that markets like real estate can be greatly affected by psychology. If that is true then the real estate market is in trouble. I was watching CNBC recently when they announced that 83% of their viewers - the investor class - believe that housing will slow in 2006.

While housing inventories are slowing more than price depreciation, eventually, prices will have to drop. It is a common trend in real estate that price decreases lag behind increases in inventory. As housing inventories continue to climb, sellers will not be able to demand top prices - at least not if they want to sell.

With many economists predicting that there could be a huge drop in the housing market next year that will push America into a recession, sellers could be about to lose a lot of power. In fact recession could exacerbate the problem for many home sellers, especially in hot markets such as California.

Of course, this could be good news for home buyers. While many real estate analysts don't expect a crash, almost all analysts predict, minimally, that some air will be let of the real estate 'bubble', especially in hot markets like Southern California.

The economy; ultimately, will be a huge factor. If the stock market does well next year, most economists believe that the real estate market will remain healthy, only dropping from double digit appreciation gains to just single digit appreciation gains.

So, if you are looking for a home in Los Angeles, or the greater Southern California area, it might not hurt to wait about 3 months. Minimally, the growing inventory of homes will push some sellers to discount their price if they are serious about selling.

New home sales plummeting, home prices moderating, what's next?

"Sales of new homes plunged in November by the largest amount in nearly 12 years, providing the most dramatic evidence yet that the red hot housing market over the last five years is starting to cool down. The Commerce Department reported Friday that new single-family homes were sold at a seasonally adjusted annual rate of 1.245 million units last month, a drop of 11.3 percent from October, when sales had surged to an all-time high." (more)

Additionally, the Southern California housing market has slowed in both sales and in price appreciation. While some areas of Southern California are still fairly hot, other areas have cooled considerably. In many areas around Los Angeles home after home that is listed for sale sits longer and longer. Eventually, many are lowering prices and still those homes are not moving.

If mortgage rates remain at their current levels, it seems the real estate market while continue to slow and prices will continue to moderate. Of course, some of this stagnation in the market is just due to the season. Winter always slows real estate sales, but just winter alone - it seems - cannot account for all the slowing.

While mortgage rates have moderated, what would happen if they went up a point?

The signs that we've reached the top of the market appear obvious, but little in real estate is ever obvious.

More on real estate.

Thinking about selling your home

Are you thinking about selling your home in the next 2 or 3 years? According to many real estate analysts, then you might want to sell your house as soon as possible.

Edward Leamer, an economist at UCLA, applauds this kind of thinking. "If you're choosing between selling now and selling in two or three years, do it now," he says. Leamer is not predicting a market collapse, but he does not see the upside in taking the risk. (more)

Orange County is second most expensive real estate market

Orange County is now the second most expensive real estate market just behind San Francisco, according to the RealEstateJournal.com. With a median home price of almost $711,000, Orange County, California appreciated about 10% over the last year.