The 2007 residential real estate market was a year with a number of curves, gyrations and swerves. Entry level buyers (between $380,000 and $550,000) were squeezed out of the market for a brief period during the months of August and September though 30 year fixed interest rate loans were historically low at 6.5 percent. High end sales were relatively unbothered by the subprime mortgage debacle, given that most high end buyers have a substantial down payment and don’t rely as much on low/no documentation mortgages with low or zero down payments. Despite the temporary mortgage turbulence, prices still remain 1.75 percent above 2006 and are 4.7 percent below the record high $655,000 mark posted in June of 2006. Median sales values ended 2006 at $613,000, slipped to $610,000 in February of 2007 and rebounded above the $620,000 range at the end of the year. Overall, 2007 sales were down by 30 percent, which still makes this one of the best years in real estate history. Now, to consider median prices of typical homes in the San Fernando and surrounding valleys 10 years ago The region was bouncing back from a terrible recession and recovering from affects of the Northridge earthquake. Home values slumped from $245,000 in June of 1989 to $165,000 in 1997. So what’s in store for 2008? To get a clear picture of the local real estate market, one must look at local market conditions. A quick glance at the federal monetary policies could be of some value, however, indicators such as the local job market, the diversity of the local economy, population trends, mortgage availability, foreclosures, housing stock, government spending, seasonal climate and local consumer confidence are reliable factors to consider when determining where the real estate market is going. Key national indicators to watch: the 2008 presidential election, continued turmoil in the Middle East that will affect oil prices and the federal government and monetary policy maker’s decision as to whether inflation or a pending recession will pose a greater threat to the nation’s economy. There are hundreds of area residents with Adjustable Rate Mortgage loans that are due to reset to higher rates in 2008. Even as lenders and borrowers work to restructure loans to mitigate losses in this billion dollar business, foreclosures will continue to rise which will add to the inventory of unsold homes. With more homes to choose from, buyers will be more discriminate as they select a home of their choice. As a result, homes will take longer to sell and the sales volume will be 10 percent below 2007 levels. Key local indicators to watch: the entertainment industry has been a piston that drives the San Fernando Valley economic engine; a protracted Writer Guild of America strike coupled with a pending Screen Actors Guild labor dispute could push the region into a less than lackluster real estate recovery. The San Fernando and surrounding valleys are major profit centers for mortgage lenders. As prices soften in some markets by 5 to 12 percent, buyers will create a demand for mortgages. In response to the financial markets, government regulators’ and mortgage lenders’ own desire to make a profit, mortgage lenders will continue their policy of tightened lending standards while designing loan products to meet the demand of qualified buyers. Lenders will promote government funded/insured loans which are less risky. Loans with 35-, 40- and 50-year amortization will become more commonplace choices for area homebuyers. Mel Wilson is a realtor who has represented buyers and sellers for more than 29 years.
Despite Mortgage Turbulence, Overall Values Persist