2006 Real Estate Forecast: Rent or Buy?

Is the fear of falling housing prices keeping you from buying your dream home? Read on!

Seasonal forces combined with slightly higher interest rates and high prices during November to yield a temporary slowdown in sales of single-family homes and condominiums in the Santa Clarita Valley, yet the forecast for sales remains strong and prices are expected to continue to rise, the Southland Regional Association of Realtors reported.

The median price of single-family homes sold last month in the Santa Clarita Valley tied the record high of $595,000, up $95,000 over the same period a year ago, the Association reported. Condominiums that changed owners had a median price of $385,000, off 2.5 percent from the record set in October, although the median was still $80,000 higher than November 2004.

"Prices may float up and down around the record highs," said Mike Davis, president of the Association’s Santa Clarita Valley Division, "but one thing is clear: Housing is not going to get any cheaper."

Sales activity typically slackens during the closing months of every year, but this year the slowdown is more pronounced as buyers pause after years of a bullish sellers’ market to judge the impact of interest rates that have risen from historical lows and to see if sellers will moderate their price demands. "No one thinks the sellers’ market is over or that resale prices will fall below current levels," said Jim Link, the Association’s executive vice president. "However, it is clear that buyers have a little more time to weigh their options, that there are more properties listed for sale, and that sellers no longer can list properties well in excess of comparable sales support."

Link and Davis agreed that it is inevitable rising prices eventually will force buyers to hesitate out of fear they may spread their finances too thin, even if interest rates stay within current affordable ranges. Yet both fully expected to see sales take off again and prices continue to rise – albeit at a more moderate rate – in early 2006.

"Everything is on track to see sales rise again,” Davis said. “The economy is strong, jobs are increasing, businesses are coming to the Santa Clarita Valley and while the inventory of homes listing for sale has increased, it is still in extremely short supply relative to demand."

"We’ll take any increase in the inventory," Link said, "yet with demand so high and inventory still so tight, it’s clear that we’re light years away from the end of this sellers’ market."

"You cannot move up to your dream home, build any equity or take advantage of the tax breaks until you grab hold of the first rung of the housing ladder," Davis said. "But go ahead, keep paying rent for another year in the hope that prices will fall. I’ll bet all you’ll get is a happy landlord and the sad realization that you’re another 10 percent, 15 percent or more away from owning a home."

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Linda Slocum
HoneyStartPacking.com
Santa Clarita Real Estate