by Scot Campbell – 02/19/2012 Source: Steven Thomas, ReportsOnHousing.com
According to Seven Thomas of Reports On Housing, the Orange County real estate market is “on fire”. Here are some of his comments from recent research:
Thus far in 2012, the housing market has exceeded everybody’s expectations. Yes, we have heard many experts declare that we have reached a housing bottom in the country, but I cannot remember anybody forecasting a substantial increase in activity. There were definite signs that activity would be stronger, starting the year off with considerably fewer homes on the market and unheard of interest rates below 4%. Interest rates below 4% are not only unheard of, that level is almost absurd.
Thomas believes the market has benefited for months from low interest rates, but buyers are now finally sitting up and taking notice of the low payments on homes as a result of lower prices and mortgage rates:
Buyers finally get it. Interest rates cannot go any lower; lending institutions simply have to keep rates at a level where they will make money. They will not go down to 0% like the auto industry occasionally drops rates to; they make money off of the sale of a car. They do that to stimulate sales. In the case of home loans, the current levels are as low as they will go.
Dataquck recently pointed out that Monthly Payments are now down at the lowest point they have been since at least 1988. Thomas believes that buyers are beginning to anticipate an increase in mortgage rates, and want to lock in a low monthly payment:
Payments at the current rates make home ownership extremely affordable. It would behoove potential buyers to go through the exercise of seeing how increased interest rates will diminish their purchasing power in a very profound way. Jumping from 4% to 5% for a $500,000 loan is a difference of nearly $300 per month, every single month for the life of the loan. That’s significant for most families.
UCLA forecasts interest rates to be over 7% in two years. The difference between 4% and 7% for a $500,000 loan is $940 per month. This very simple math is providing the motivation for home buyers. Even if values decrease a little bit more, the difference in rates will still result in paying more per month.
The bottom line: buyers need to buy based upon a payment that they are comfortable paying one year from now, two years, five years, etcetera. When a homeowner pays their monthly mortgage several years down the road, I am going to go out on a limb and state that they are not going to care about what they paid for a home. Instead, they will care about the monthly mortgage payment.
To look at the latest Orange County Housing charts goto: http://www.reportsonhousing.com/docs/OCHousingCharts-VN6.pdf
For questions about buying and selling real estate in Orange County, contact Scot Campbell. He is the President of The Scot Campbell TEAM at Coldwell Banker-Campbell Realtors in Huntington Beach, CA. He has been a licensed broker for over 21 years and has brokered over 1000 homes and just about every type of transaction imaginable. Read his profile and client reviews at www.ScotCampbell.com He can be reached at 714-960-0700 at the office, 714-336-0394 on his mobile number or via email at Scot.Campbell@ColdwellBanker.com