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Looking Ahead to 2005

This article was originally published in the Good Times Magazine, the December 16-22 2004 issue, under the title, "Looking Ahead to 2005 ."


The year is quickly winding down! 2004 has been a busy one in the Santa Cruz Real Estate market. Low interest rates have continued to fuel buyer demand; this, combined with a very limited supply of homes for sale, has resulted in a healthy appreciation of home prices throughout the county for every class of property.

What does the crystal ball reveal for real estate in 2005? Predicting the future is notoriously difficult. However, with interest rates still at near historic lows, many lending industry professionals talk of rates rising modestly in 2005. What will this mean for folks in the real estate market?

If you are a property owner considering selling your property, an interest rate increase may result in your property staying longer on the market, and possibly selling for less than top dollar. This is because higher rates result in higher payments for borrowers - and payments are already very high in comparison to the median family's income. Higher payments will mean that fewer buyers will be in the market for your property. Fewer buyers means lower demand, and the law of supply and demand tells us that this will put a damper on your property's value.

Buyers in 2005 would do well to purchase before rates rise. A quarter or half a percentage point increase in your loan rate can result in thousands of extra dollars per year in housing costs. As a buyer, you may be worried of a 'price bubble' or buying at the peak of the market. However, the local market rarely experiences dramatic price drops; more likely, home prices will plateau as rates rise. However, someone who buys now will lock in a loan at a low interest rate, and so will enjoy comparatively less expensive housing costs.

It is quite likely that 2005 will remain a seller's market. If you are considering selling your property while the market is good, there is no time like the present. I encourage you to visit my web site, SantaCruzHomePrices.com, for a free, no-obligation, over-the-Internet home price evaluation.

Wishing everyone a Happy New Year and hoping for Peace in 2005,

Seb Frey the Real Estate Guy


 

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