Home Prices Tied to Consumer Spending
According to Leslie Appleton-Young, the California Association of Realtors (CAR) Vice President and Chief Economist:
Over $200 BILLION per year in spending power has been added from borrowing against rising home prices
Home equity loans increased from $552 Billion in 2001 to $881 Billion in 2004
Home equity cash out refis grew from $92 Billion 1996-1999 to $400 Billion 2002-2004
It is predicted that this spending will slow down as housing price increases moderate. But what exactly does that mean?
Let’s take a look at what’s fueling this increase in home prices.
Strong demand from:
Low mortgage rates
Demographics – baby boomers are having a large impact
Investing in real estate instead of other investment choices
Possible speculation
Limited supply:
Limitations on new construction
Low inventory of resale homes for sale (only about 3 months supply in the SCV)
So is there housing bubble in our future? Experts say NO, but they do expect a "soft landing" where housing prices will moderate somewhat.
Ms. Appleton-Young says to expect 6%-12% growth in the Southern California market for 2006. Hmmmm… haven’t we heard this before? This is exactly what we heard 4th quarter 2004, and 2005 definitely experienced much more growth than predicted!
Ahhhh… what I would give for that perfect Crystal Ball!
borrowing, california association of realtors, chief economist, demographics, home equity loans, housing bubble, housing price, inventory of resale homes, investing, leslie appleton-young, mortgage rates, southern california, speculation, spending
November 22, 2005
castaic golf course, Santa Clarita Real Estate