Real Estate Club - Real Estate Advisory Services

Mortgage Rates Jan 24 2006 - Feb 20 2006
Conventional	HIGH	LOW
(Under $417,000)
- 30 Yr	6.125 %	5.750 %
- 15 Yr	5.625 %	5.375 %
Jumbo	HIGH	LOW
(Over $417,000)
- 30 Yr	6.375 %	6.000 %
- 15 Yr	5.875 %	5.625 %

A Monthly Newsletter by Alan Fine, Director of the Real Estate Club^®
The Real Estate Club® is an advisory and resource service that assists people with strategies for home buying or selling, and refers them to quality agents and/or companies to accomplish their real estate goals.

Real Estate Review
The median San Diego home prices have leveled off, after peaking at $515,000 in October 2005 and falling to $512,000 in November and $510,000 in December. This decline in prices is normal for that time of the year, given the seasonal slow down in the market. However, what is not normal is the growing inventory of homes for sale.

In 2005, there were 81,500 homes for sale with 37,885 sold.
In 2004, there were 71,884 homes for sale with 40,119 sold.

This translates to almost 10,000 additional homes for sale and 2,200 fewer sold in 2005. In other words, the supply of homes for sale grew, while the number of buyers declined. The economics of a growing supply of homes for sale coupled with a decrease in the number of buyers tends to contribute to lower housing prices.

Interest Rate Review
Long term rates (Bonds/Mortgages), which had actually been dropping since November 2005, contrary to the Fed increases, reversed their course and shifted into an up-trend phase in mid-January 2006. In addition, the short-term rates have started to move above the long-term rates. There are various economic interpretations of how this shift affects the economy. From a homeowner’s point of view, the short-term adjustable rates advancing above the fixed rates can become costly. Consequently, it is a good time for homeowners to obtain a long-term fixed rate, if possible.

Conclusion
There are a few critical factors that are detrimental to the housing market: Growing number of homes for sale, Decreasing number of buyers, and Increasing interest rates. Currently, due to increasing mortgage rates, borrowers of adjustable home loans may be forced to sell their home. In the long term, the increasing rates reduces the number of buyers who qualify to buy a home. These factors contribute to an overall drop in housing prices.

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