Do any similarities exist between the real estate and stock markets?
In stock market jargon it is referred to as testing the bottom or testing the lows. If prices hover around the previous lows without establishing a new benchmark it can be recognized as a positive sign. It may be perceived that price stabilization will occur and that the free fall is over, at least for a while. Maybe it’s just a psychological barrier more than a realistic barometer of market indicators, but sometimes all that may be needed is some innocuous event indicating a market change.
Home prices in Pasadena hit a four year low in October 2004 and then took on a meteoric rise for the next 49 months before returning for a landing in November 2008. With Pasadena home prices in a downward spiral the last couple of months, there seems to be returning momentum in the housing market. Momentum however is a relative term when compared to the recent events of the last few months.
Increased activity has been precipitated by declining interest rates, motivated sellers and plenty of property to choose from. If you were aiming to buy a house a couple of years ago and were priced out of the market, today’s events must be looking pretty good to you.
Look for December home prices to modestly rise or at the very minimum, at least stabilize. Home prices have been known to rise in December if the previous months activity has been slow as evidenced by December 2006 in which prices jumped considerably over the preceding months.
A Discriminating Real Estate Market
The new real estate market is going to pick and choose who benefits. You would think with very favorable interest rates that a re-fi boom would be in the works. Not necessarily so. Consider the plight of the self employed. Today’s refinance rules are based upon one thing….. does your income fall in line with the debt to equity ratios of your new loan? It doesn’t matter that you have never been late on a payment or that your current payment is higher than your new lower refinanced payment would be. Forget credit scores, anyone ever heard of FICO! Now you have to pay to play.
And if you were thinking about a construction loan to build your dream house. Well it seems that you can forget that too. A conversation with a direct lender last week informed me that construction loans were harder to find than consumers paying full retail this holiday season!
I don’t know about you, but I am sure glad the $700 billion federal bailout has retuned a sense of normalcy to our credit markets.