Yes, prices are down in L.A. County, Orange County, Ventura County, San Bernardino and Riverside Counties. In fact, I could list most of the counties in our giant state of California and most of them would show that real estate prices are down…big time. But, guess what? Sales are up!
This is reassuring news. Sales of resale homes and condos in Southern California counties increased 2,031 units over the previous month. L.A. County, for instance, talled 2900 sales, an almost 20% increase over the previous month. Yes, prices are lower, but the buyers are coming out and more are actually buying, taking advantage of the great inventory and the lowest prices since 2004.
To add to the good news, the stimulus package recently passed by Congress has actually begun to take effect. After the sub-prime mortgage crisis hit the media in August 2007, credit of all kinds, especially mortgage money, essentially dried up as the jittery financial markets changed lending guidelines almost daily, dropped hitherto available kinds of loans, such as Alt-A and upped the rates on jumbo loans. This combo punch hit us hard here in Southern California, and, of course, also in the north as well as in many other parts of the country.
Now, we have government-backed FHA loans available for amounts up to $729,000. Lenders are willing to offer these since the government underwrites them. Qualifying is tougher than in the past few years, but many well-qualified buyers who were not able to buy anything in the previously super-heated market can now do so. The pace now is more leisurely. More and more buyers who say they’ve been looking for one entire year or two years are now making that purchase.
Add to that mortgage rates which, while doing their normal oscillation from day to day, are now lower than 6%. That helps buyers as each percentage point lower increases the value of the home the buyer can purchase. Jumbo loan rates now apply only over $729,000, instead of the previous $417,000, another result of the stimulus package. As a result, we now have more buyers who can buy properties which are much better priced than even a few months ago.