California Real Estate Market Cooling in 2007After several years of runaway price increases, it appears that California’s market is due for a bit of a downturn in 2007. According to the California Association of Realtors (CAR), the trend will be downward throughout the coming year as the market begins to correct itself from the upward spiral it had been enjoying until recently. According to CAR predictions, the median price of a home in California will decrease some 2% over the course of 2007, to $550,000, down from a median price of $561,000 in the previous year. Sales of homes will also be down by as much as 7%, CAR says, from last year’s total of 481,200 units to 447,500. Of course, nearly everyone knew that the hot real estate market of the last few years couldn't be sustained. Sales and price gains set new records during that time, but real estate is nothing if not cyclical, and many experts have been predicting a market correction for quite awhile. The only question seemed to be when that correction would begin. It appears that 2007 will be the year, but there’s no clear agreement as to how long the correction will last. Buyers have had less reason to hurry into purchasing a new home just to cash in on the steep price increases, so the market has slowed as a result. Buyers are waiting to see if prices will decline even further, but indications are that the 2007 dip won't be as drastic as some economists had predicted. There are other factors that have contributed to the decline, as well, including fixed-rate mortgage percentages, which have topped 6% for the first time in several years. Adjustable rates have also increased, topping 5%, which has caused buyers to become more concerned about the affordability of their housing. According to CAR estimates, homes in the Central Valley, San Diego, and Riverside/San Bernardino regions are likely to see greater sales declines than the rest of California. However, even in the face of all the negative influences and numbers, CAR estimates that owning California real estate will continue to be a good investment in the long run, and the statistics seem to back up that estimation. After all, since 1968, the average price appreciation for a California home has been 9.1%. Real estate prices go up and down, and in the long run, California, like most other parts of the country, will eventually rebound. |
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Copyright © 2007 Jeanette J. Fisher