California Housing and Mortgage Update: Pick Your Spot

By Richard Barrington
Local Lender Columnist
Sep 17, 2007
Homebuyers may be familiar with the old adage that three things determine the value of real estate: location, location, and location. It is important to understand that this also applies to the direction of real estate trends. As the Southern California housing market demonstrates, whether or not prices are soaring or crashing often depends on where you look. The experience can vary from one community to the next.

Winners and Losers

All year long, the press has been full of stories of how trouble in the subprime mortgage market has triggered a housing slump. Along with this, rising mortgage rates threaten to put a further damper on housing prices.

Despite this, do not expect to find bargains everywhere you look. As measured by price-per-square-foot, houses across Southern California during the first third of 2007 were reported to be up 2.2% compared with a year earlier. A 2.2% rate of increase is virtually flat, especially by California standards.

However, the actual experience in individual communities was anything but flat. For example, prices in Malibu were up 19.4% over the same period, and in Encino they were up 18.2%. Those communities were big winners. Among the big losers were Santa Paula, where housing prices were down more than 20%, and Burbank, where they were down 15.8%.

Rising Rates Make Getting the Right Price More Important

The point is, you can't generalize. Whether you find housing prices to be steep or a bargain will vary from community to community. As mentioned previously though, mortgage rates have risen, so the total cost of buying a home for most people will now be steeper. With more of the mortgage going to interest rather than principal, it is especially important to pick your spot to find the right price.

Source
LA Times

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.