Los Angeles a Bright Spot in California real estate?

I watch CNBC pretty regularly and there have been some pretty interesting real estate reports coming out lately. Overall, the real estate market in the U.S. isn't looking very good; however, there are some bright spots in the NorthWest and in Florida, according to much data. Overall, California is primed for a drop in real estate prices and San Diego is probably the market facing the biggest losses in real estate value. Even San Francisco is not a healthy real estate market. Yet, many analysts claim that Los Angeles is probably the strongest market in California. So,if you were expecting a big real estate bust in Los Angeles before buying a home, you might want to head down to San Diego instead.

No big price drops for Southern California real estate?

As home buyers retreat and wait on the sidelines for the Southern California real estate market to crash, some sellers are taking action. According to the LATimes, many home sellers are taking their homes off the market, rather than reducing their home sale prices. Many other sellers are still leaving their homes on the market, but refusing to drop their price. If these sellers can't sell without a hefty price reduction, they are ready to stay put. Consequently, the number of homes available in all the Southland real estate markets is dropping, even though home sales are also dropping.

Since the economy is strong and the job market remains steady, many home sellers are in no rush. Unlike the last downturn in the So Cal real estate market, there are only a small amount of foreclosures occurring. As a result, even though home sales are declining, home prices are still sheltered, as long as the economy remains strong.

Do you need a Los Angeles real estate agent?

Los Angeles real estate prices stabilizing?

In recent months many home buyers have pulled out of the real estate market, deciding to wait for a few months to see what happens. To be sure, more homes have hit the market followed by some price depreciation, however, is the big price correction still to follow?

Realestatejournal.com points out that while real estate data has shown declines in recent months, many real estate reports, such as one by Harvard, point out that declines of 5% are extremely rare and require severe overbuilding and massive job loss - neither of which have occurred in the Los Angeles area. Consequently, predicting the real estate market is like predicting the stock market - it's almost impossible to predict.

Then, last Friday, Allen Greenspan noted that the "worst may be over" for the real estate market (more).

Consequently, if the job market in the Los Angeles area stays strong and mortgage rates stay at their current levels, or even drop, real estate prices might just stabilize. Sure home values might not appreciate much, but they won't depreciate much either, until something causes the next real estate boom or bust.

Again, predicting that is almost impossible.

Los Angeles real estate to depreciate 4.8% by 2008?

The housing bubble. Is there a real estate bubble? Will there be a soft landing or will home prices crash? No one really knows and different surveys and experts claim different things. Still, according to a study by Moody's Economy.com, Los Angeles real estate is expected to depreciate by 4.8% over the next year and a half, bottoming out in April of 2008. (more)

Southern California real estate appreciation slows to less than 3%

"For the first time since the latest housing boom started six years ago, home price appreciation for each of the six Southern California counties has fallen to single-digit levels or worse, data released Tuesday showed." (more)

While it seems obvious that the days of double digit home appreciation are over in Southern California, when will we see price depreciation? More important, how much price depreciation will we see?

Already, some economists are speculating that the Fed might actually lower rates in early 2007, which could push mortgage rates lower as well. Would this delay, or even prevent, such a downturn? Could it cause another mini-boom?

Foreclosures up 53% in August

"In August, 115,292 properties entered into foreclosure, according to RealtyTrac, an online marketplace for foreclosure sales. That was 24 percent above the level in July and 53 percent higher than a year earlier." (More)

Much of the spike in foreclosures is being driven by ARM loans. While California, Nevada and Florida have spiked the most recently, the hardest hit areas could end up being in the Midwest where slumping job markets could make rising mortgage payments more difficult to manage.

Will falling energy prices buoy the real estate market?

Many economists claim that markets, such as real estate, are strongly affected by psychology. Consequently, the current real estate boom, many economists claim, has been driven by the irrational exuberance of our overly optimistic psychology, which is now not quite so optimistic.

Other economists don't disagree that psychology affects markets; however, they believe much of the current real estate market has been driven by changing fundamentals that ultimately drive up the value of real estate. Sure psychology has built up some froth in some markets, but mostly, they claim, current real estate prices reflect a new reality.

Nonetheless, in recent months, more and more real estate buyers have moved to the sidelines and the media has noticed. 'When will the crash come,' every one is wondering, and our psychology has become even more negative. Yet, there is no proof a crash will come. Likewise, there is no proof a crash won't come. Once again, we're talking psychology.

Yet, a slowing real estate market isn't the only thing affecting consumer psychology right now. High energy prices have also had a negative effect on consumer psychology. Ironically, high energy prices spiked around the same time the real estate market started slowing more significantly.

Perhaps, high energy prices had something to do with the slowing real estate market?

Recently MarketWatch noted, "In terms of dollars and cents alone, I would bet that falling energy prices will have more of an impact on the economy than falling home prices. This is because we use energy constantly, and thus benefit when its cost is lower. Housing, on the other hand, is not something that is bought and sold daily like energy or any other commodity, although there's been a plethora of home-equity loans that have allowed a number of consumers to spend more than they earn."

Thus, might falling energy prices restore a little consumer confidence? If consumer confidence starts to build, might this not also affect the psychology of the real estate market?

Even more interesting, what if the current real estate slowdown pushes interest rates to their lowest levels in many months, just as consumer confidence over lower energy prices builds? Could this not rekindle consumer confidence in the real estate market?

While an energy driven boost in consumer confidence might not drive up home appreciation into double digit gains, it could possibly spark new gains in home values.