Home values in August were on the same level as they were in June and July, indicating that the torrid market is cooling off. The median home price in Southern California remained around $385,000 still good for an increase of 24.6% compared to August 2012. This is great news for people that started to become “priced out of the market” and it also decreases the chance of hitting another “bubble”.
Reasons for the hot real estate market (Past):
- Historical low mortgage rates
- Relatively low home prices
- Extremely low inventory
- Rapidly decreasing foreclosures
- Investors seeing huge opportunities and buying cash
Reasons for the slowing real estate market (Present):
- Increase in mortgage rates
- Increased level of inventory
- Decrease in investors buying (from a high of 34% in Dec 2012 to 27% in Jul 2013)
- Less homes resold that were foreclosures (was 56.7% in Feb 2009 and is only 7.8% in Jul 2013)
Reasons why it may slow but not end (Future):
- Banks are loosening the mortgage standards
- Jumbo loans have gotten cheaper compared to generic loans which is great news for the real estate market in Orange County
- Slowly recovering economy
- Improving employment numbers
- People that foreclosed their homes in the early stages of the downturn are working their way back into good credit scores and start dreaming again of owning a home
All in all, this is good news! Year over year home price increases of 20% are not sustainable and don’t make sense. Taking a breather and continuing upward at a more moderate pace is exactly what the market here in Southern California needs.
Contact Roland Smets at roland.smets@me.com or at (949) 212-0471 for any of your real estate needs! Always willing to help.
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