Although the housing market in Southern California showed improvement for December 2009, various economists interviewed see it differently: it is a temporary blip made possible only by government intervention (i.e., forcing down mortgage rates and extending the homebuyer tax credit), or are we really through most of the storm? From an L.A. Times story:
Rock-bottom interest rates and stronger sales in higher-priced neighborhoods helped Southern California’s housing market post robust gains in the typically sleepy month of December, new data show, and experts say the momentum is continuing — ushering in an early start to the spring home-buying season.
The median price paid for a Southland home rose 4% to $289,000 last month from December 2008, the first time the closely watched figure has posted a year-over-year gain since the region’s real estate market took a nose dive 2 1/2 years ago, according to data released Tuesday by MDA DataQuick, a San Diego real estate research firm.
Rebounding home prices could help the Southern California economy recover from its slump, as a stronger housing market could lead to hiring on construction sites and in real estate sales, title and escrow offices, said Esmael Adibi, director of Chapman University’s A. Gary Anderson Center for Economic Research.
“The worst is behind us for sure,” he said. “For the economy, the implication is, at least on the residential side, we don’t expect more layoffs, and you might actually see some pickup in employment.”…
One thing driving sales is the April 30 expiration of tax credits for home buyers. First-time home buyers can get up to $8,000 in credit on their federal income taxes, and current homeowners can qualify for up to $6,500.
Low mortgage rates are also a factor. Thirty-year fixed-rate loans were below 5% through most of December and haven’t risen much.
The role of the federal government in the housing market remains key. Some experts worry that once certain policies and programs wind down — among them low interest rates, tax incentives for buyers and an increased accessibility of mortgages backed by the Federal Housing Administration — the housing market could falter.
Christopher Thornberg, principal of Beacon Economics, predicts home prices will drop once those policies and programs expire.
“The bounce in the housing market is due to government policy, not due to fundamentals,” he said. “None of these programs fix the underlying problem. They only delay the solution — they only delay the healing process.”…
Richard Green, director of the USC Lusk Center for Real Estate, said buyers have sensed more security in Southern California’s real estate market in recent months and have begun to get off the fence.
“We are getting a little bit of what we had six or seven years ago, where people are worried if they don’t get in now they are going to miss out on an opportunity,” Green said. “In a decent neighborhood, in the half-a-million-dollar range, we are back to lots of offers.”
