Real Estate Article: The Southern California Estate Market Peaks Again!
04/05/2005

Presently, there is a high demand in the Southern California real estate market which ensures us that current prices are strong and steady. This demand has also allowed the declining prices from last June to once again rise to their peaks. Amidst all this, one question that comes into concern is whether or not prices will continue to rise. Let’s look over what’s been going on in our market.

According to my statistical resources, the Riverside and San Bernardino County are the two areas which have grown the most. In particular, the San Bernardino County, where the median price has increased by over 40 percent when compared to the same time last year. This information is great news has surprised many and brings much excitement. Although the current prices have increased, why did prices drop last June in the first place? I believe the main reasons are expectations and demand.

The rising prices over the past few years have caused the affordability index to decrease. Both buyers and sellers believed that the housing market had hit its peak and sellers didn’t want to pass up the opportunity. This led to inventories increasing by up to 3 to 5 times. Aware of the peaking market, buyers wanted to wait until the prices decreased before entering the market but now their hopes have been shattered. The current inventory has dropped back to normal and even though prices were decreasing for about four months, they are now increasing and staying strong and stable. Demand for houses is extremely high and has surpassed everyone’s expectations. The prices are strong and the demand is high but the number of sales has decreased. This is because inventories have decreased.

Aside from the changes occurring in our estate market there is also another major factor that must be acknowledged, our economy. Because international gasoline prices have increased, there is increased pressure for our economy to undergo inflation. The Federal Reserve has already adjusted the federal funds rate to 2.75 and implied that the rate will continue to increase. Everyone is concerned with whether the rate is going to grow in a steady fashion or skyrocket in a short amount of time. Because the federal funds rate has increased a quarter, commercial banks have adjusted their prime rate accordingly to 5.75%. Freddie Mac’s report stated that the 30 year long term mortgage rate has risen to over 6%. If the short term rate keeps increasing, then it won’t be long before our mortgage rates surpass 7%. This may have a negative impact on our real estate market.

The real estate market is complex and constantly changing. My goal is to convey to you, the constant changes occurring in our market as quickly as possible so that you can make better judgments when considering the real estate market.

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Serving Areas: San Bernardino County (California), Riverside County (California), Los Angeles County (California)
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