With Housing Affordability off the charts, it shouldn't be surprising that volumes are picking up. It doesn't mean that prices will go up any time soon, but stability is huge especially for banks. Investors expecting a huge decline in the market might be caught off guard with this news.
- For the Garvins, who weren't eligible for the government tax credit, record-low interest rates were a big enticement. With the rate on their 30-year fixed-rate mortgage at 4.75%, the payment on their $292,000 loan is around $1,600 a month. Nationally, the rate on a 30-year fixed-rate loan averages around 4.85%, the lowest on record.
- In California, politicians are adding to the federal inducements. The legislature has passed a $10,000 tax credit available to anyone who buys a newly built home. (Existing homes don't qualify.)
- First-time home-owners are suddenly entering bidding wars with real estate speculators from as far away as Spain and Germany. Sales in February outpaced those at the peak of the boom, with some houses getting more than 50 offers and selling above their asking price.
- Plenty of caveats are in order, because there are peculiar bear-market factors at work. The fact that inventories are falling precipitously in California—to just 6.5 months' supply from 15.3 months a year earlier—would seem to augur well. Historically, "prices respond very dramatically to inventory," says William C. Wheaton, director of research at the Massachusetts Institute of Technology's Center for Real Estate.