Finding an area with appreciation potential
Some real estate experts believe that home buyers who purchase a house during the current market will gain equity if they stay in the house for at least five years and purchase in a desirable neighborhood.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Neighborhoods with strong employment bases, such as hospitals, universities, and government, tend to be recession-proof. People desire to live near their jobs, so housing that is in close proximity to these types of industries are generally in higher demand than those in other areas.
• High gas prices and roadway congestion have led many people to seek “walkable” communities – neighborhoods that offer both daily needs such as grocery stores and coffee shops to more specialty items like hair salons, all within walking distance. Walkable communities also provide public transportation, which is becoming more desirable to many home buyers and is increasing demand for housing in these areas. One Web site, walkscore.com, calculates the walkability of a community by locating stores, restaurants, schools, parks, and other attractions that are within walking distance. The scores are based on a 100-point scale with 100 points being a “walker’s paradise.”
• Home buyers who seek a new or nearly-new home should search in areas where the homebuilder is known for honoring warranties and building high-quality homes that are structurally sound. Homes in these areas are more likely to weather well and gain value in the future than homes in areas where the homebuilder is unknown.
• Homes in neighborhoods with sales momentum generally appreciate at a faster pace than areas where sales are flat. Some real estate industry consultants advise clients to pay close attention to the “list to sale” numbers, which reflect the difference between the asking price and the final closing price. Usually, if the gap in list-to-sale numbers is narrow, then the real estate market in that area is improving.
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Mortgage Forecast for the Week
This week, several scheduled items could cause some more manic movements in the markets…and the biggest of all could be the Fed Policy Statement and Rate Decision that will come on Wednesday, following the wrap of the Fed’s regularly scheduled Federal Open Market Committee meetings. Remember: The Fed joined with other central banks from around the world and cut their benchmark Fed Funds Rate earlier this month to help restore confidence to the financial markets. The Fed is widely expected to cut its benchmark rate again this week, and some people are wondering if the Fed could go where it has never gone before and bring the rate below 1%.
Other important reports to note this week include Wednesday’s Durable Goods Orders, which is a measure of how many “durable” or non-disposable goods have been purchased during the previous month, and Thursday’s Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. Also, on Friday we will get the details on the Fed’s favorite gauge of inflation, the Core PCE (Personal Consumption Expenditure) data, from the Personal Income report. Each of these reports will be telling, given the growing talk of recession.
Before all of this, there will also be housing news in store with Monday’ New Home Sales Report. Last week, we learned that Existing Home Sales jumped to a thirteen-month high as foreclosures continue to drive down home prices, and it will be important to see if a similar trend is occurring with New Home Sales.
If the economic news this week is dismal, Bonds and home loan rates may be the beneficiary and find some improvement…but the words and actions of the Fed are likely to be the primary driver for interest rate action this week. As always, I will be watching closely and would welcome your calls with any questions you may have on your own situation, and how the changes of the week may impact you.
Ernest Tepman
President
The OCD Group Inc.
Los Angeles: 800-963-4623
San Diego: 877-863-4623
E-Mail: marketupdate@theocdgroup.com
