Thursday, June 22, 2006

Southern California Real Estate.. No Bubble in Sight

After predicting doom and gloom in the housing market since 2001 the boys at UCLA have finally decided that the Southern California real estate market will not see any major price reductions in the coming months or years.
Their new forecast for 2006-2007 forecasts housing prices to flatten as interest rates rise but they don't foresee huge decreases in price.
Their report states: The real estate slowdown will lead to a flat housing market and a slower economy. We do not predict a recession, nor do we predict a substantial decline in average nominal home prices. There is not enough vulnerability in the usual sources of employment loss to create a recession and the historical record suggests that average home prices do not usually fall without this kind of job loss.
As the boys at UCLA are always very conservative we will probably see small price increases as opposed to price flattening in the Beach Cities market. Price appreciation may be limited to 5-7% instead of the 15-20%+ we have seen in recent years.

The black cloud on the horizon will be if homeowners with non-traditional mortgages find themselves in a bind when payments increase at the end of the fixed period for some of the adjustable loans. If the market stays flat and homeowners are forced to sell if they can't make the higher loan payments there may be some
bargains available. However in our local Beach Cities most homeowners are financially able to meet higher payments or will be able to refinance to obtain better terms on their mortgages.

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