| $1,582,500. The media price virtually halves
to $795,500 when you factor in condos. Reports show that in 2005, Santa
Monica home sale prices have risen 13.8% from 2004. Across the country,
the average U.S. home price climbed 12% over the last 12 months.
Information is confirming hearsay that our housing boom, which has gone on for the past five years is plateauing. Homes are staying on the market longer – close to four months this year, as compared to three last years — and sellers in some cases are cutting asking prices. Still, analysts feel that there is still enough demand in the market to keep prices from rolling over. Keep in mind that approximately 250,000 households move to Los Angeles each year, while new housing is built for 200,000.
"I don't see any signs of weakening. The market just isn't frenzied anymore," observed John Karevoll, DataQuick's chief analyst.
The UCLA Anderson Forecast – considered to be one of the most accurate housing forecasters predicts that, “The California economy will probably experience sluggish growth in 2006 but should avoid a recession if, as expected, housing prices cool without crashing.”
The forecast also sited the possibility of additional uncertainty when Federal Reserve Chairman Alan Greenspan retires in January after 18 years, leaving Ben Bernanke to steer the economy.
On December 12th, the Federal Reserve pushed the prime interest rate up to 4.25% - the highest level in 4 1/2 years. This marks the 13th consecutive quarter-point move since the Fed began raising interest rates in June 2004, when the funds rate was at a 46-year low of 1%. Some analysts believe that the Fed will raise rates at least one more time by a quarter-point at Alan Greenspan's last meeting as Fed chairman on Jan. 31.
The powers that predict real estate cycles don’t seemed to be worried
about a downtown. The question in California is how long the current pace
of property price increases can be sustained? Cynics were predicting that
we would drop down to single digit appreciation in 2005. Now those same
pundits are predicting 2006. Feel peaceful, no one is predicting price
declines at this point in time.