Fourth Quarter, 2006
As we enter the 4th quarter of 2006, it is clear that for most price ranges along the South Coast, 2006 has been a transitional year. The real estate market has ended possibly the longest and strongest Sellers market ever (almost 10 years). Since 1996/1997, our area has seen dramatic increases in home prices, fueled in large part by historically low interest rates. The largest gains have been in the market most sensitive to interest rates: condominiums, mobile homes and entry-level houses. Not surprisingly, this has been the segment of the market most affected by rising interest rates. For condominiums and entry-level houses, Buyer demand has cooled considerably, inventory levels are rising rapidly and prices are beginning to fall.
Despite the rise in interest rates over the past year, by historical standards they are still extremely attractive. Banks continue to be very creative and accommodating in their efforts to lend Buyers money. The slowdown in the market has more to do with Buyers psychology than economic factors. Prices rose to a point where Buyers finally said “No!”
Conversely, the estate market remains a strong Sellers market. Buyer demand remains high and inventory levels are surprisingly low. The high-end market is less sensitive to interest rates than to overall economic conditions. At the time of this article, the stock market is flirting with an all time record high and favorable demographic conditions are driving wealthy Buyers to our area.