Real Estate Articles
Market Flash September 2005
By Lisa LoPresti

Statistics:
Interest Rates: Thirty-year fixed rates at about 5.3% might be half a point lower than they were last year, might go a little higher, a little lower... that rate’s been bobbing around between 5% and 6% for months or more. Adjustable rates, at 4.85%, are definitely converging on fixed rates.
Mortgage rates aren’t just staying low because it suits borrowers – or their lenders. They’re being held low by lending managers who understand that, with affordability declining, the main thing that will keep the market vigorous is cheap money…in other words, a reliably low payment for a high mortgage balance.
If the Fed funds rate climbs between now and the end of the year, mortgage rates are likely to climb at least in proportion. Make it clear to prospective buyers that “wait and see” is not a fruitful policy. Home prices are going up and lending rates soon may too.
Inventory: Not really a concern except in the most desirable neighborhoods, where finding the right property will just be part of the extra time and effort you put into satisfying an upscale customer. The only exception to this may be sporadic scarcity of entry-level properties hotly pursued by first-time buyers scampering to get into the market while the getting’s good.
News Media: Even given how much we said about interest rates, the news media – and their abrupt fixation on the future of residential real estate – may be the most important factor in this month’s Market Flash. After months and even years of steady expansion, the residential market is being described as overheated and in danger of collapse. And to us, a lot of what’s being said seems not entirely accurate, since real estate has been a reliable driving force of the consumer economy while other parts of it have fluctuated.
It may help to remind prospects that a home, first and foremost, is a residence rather than part of a portfolio. Even the most enthusiastic doomsayers are conceding that a major general loss in California’s real estate value is unlikely; short of that, the attraction of a home is as the center of life and a safe place to be. Buyers, especially move-up buyers who have repeatedly profited from sale and purchase, may find this a shift in perspective.
Overall Assessment: For now, prospects are enthusiastic, rates are still low, and inventories are attractive…which means that “wait and see” won’t get you anywhere either.

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