The history of Interest Rates and the Present Numbers...

There's no shortage of news about the housing market. We just wanted to take a minute to lay out the numbers in a way that doesn't happen too frequently.

The California Association of Realtors reports that this year (at the close of 2007), the number of housing sales has dropped 25%. This is the information that we are barraged with daily. In 2006, 475,000 single family homes were sold in California, in 2007 - 367,000 (thus the 25% drop). Scandal, tradegy, crash and downward spiral, no? Maybe not. Let's look at another trend (one that matters more to us as investors and home owners). The California Assocation of Realtors (CAR) also predicted that the price of the average home would drop 2% in 2007 - it, in fact, rose 3.2%. Who is the information most terrifying for? Realtors. For them it's a challenge because there is 25% less volume happening. For us, as owners and buyers, this is good news - because it means our investment is still increasing in value. We are still making money daily.

We don't want to overwhelm with too many numbers and statistics, but keep this in mind - CAR does predict that the average price in Southern California will drop 4% in 2008 - the last (and first - if it's ends up being true) year that the median price will go down. Glance at the interest rate chart above; we are still admist the lowest interest rates of the last 30 years.

Consider this - if you're looking for a $750,000 home and you want to wait because you anticipate the market dropping - and let's say, it does in fact drop the predicted 4% - your $750,000 home is now buyable for $720,000. If, while you wait out the price reduction, the interest rate changes (by a meager 1/2 point increase) - it would have been cheaper to buy the house for $750,000 than the reduced house for $720,000. Paying a 7% loan on a $720,000 home is more expensive than paying a 6.5% loan for a $750,000 home.

What's it all mean? You don't have to take our word for it, but for us, 2008 is about buying. If you're someone who wants to wait on the sideline and see what shakes out, that's a legitimate gameplan - but if you know anybody who wants to sell, send them our way - because we're in the market to buy.

Cheers... the LA home