Where is the Market Headed?

I was at a party a few days ago and the housing market was the main topic of conversation. Everyone wanted to know what's happening in the real estate market. In the last week I find that my answer has changed from a few weeks ago. I think Katrina will have a major effect on the housing market in most areas of the country. It appears that the FED is not going to continue hiking rates as they had planned. This will definitely keep mortgage rates at their current low levels. Over the next few months you will see increases for all building materials. I suspect finding a skilled contractor will be difficult as many will head to the disaster areas where they can make a lot of money in a short time.
Some areas, particularly California where the statewide affordability is 16% and the Los Angeles area is 14%, may see a slight slowing in the market probably until February or March. This short period of adjustment will give us the time to breathe a little and let prices settle. However when the major rebuilding starts in Louisiana and Mississippi in about 6 months; the price increases on building materials will push up the price of new homes in our area. This will make existing homes more attractive to buyers. Of course prices on existing homes will go up as demand increases.
If you sold your home and have been renting while waiting for the market to crash it might be time to rethink that position. There will be a slight window of opportunity in the next few months to buy a home or sell and trade up to a larger home at a somewhat reasonable price. I think after the building starts in the South you will see price increases and will be kicking yourself for not buying in the fall of 2005 when prices were so good....