The outlook for real estate is looking brighter than last year.  Lawrence Yun, chief economist for the National Association of Realtors (NAR), says “The market is recovering and we should trend up to a healthy, sustainable level in 2011.”  Yun also added that “ home price prospects will vary depending largely upon the local job market conditions.”

California is one state that is seeing home sales rise.  Home sales rose by 9.2% from October to November and continued to increase into December.  On a local level,  our office sales were up 25% this December.  These sales occurred in almost every community on the Peninsula. I am confident that these numbers would be higher if we had more inventory. Also, according to the local newspapers, retail sales were up, restaurants were booked and the hotels were full over the holidays.  This proves once again that we are truly blessed to be living on the Peninsula.

As we have discussed in past updates, the reason for this increased demand is that most people see real estate as one of the most solid investments.  Today you need assets to create wealth, and along with stocks, bonds and gold, real estate is continually at the top for return on investiment.  The true value in real estate is in the land and because our land is limited on the Peninsula, it is almost guaranteed to appreciate over time. 


A Note on Bond Yields and Interest Rates as to Kick Off 2011

As we enter 2011 and the yield on the 10 year treasury hovers close to 3.5%, it is important to note that while long term mortgage interest rates have increased over the past month by nearly .75% in rate (on 30 year fixed), interest rates are nearly identical to what they were 12 months ago.  The point here is that interest rates are still near historic lows when compared across the last few years (or the last 40) and the opportunity for the consumer is still great.  As the economy improves, long term interest rates will increase.  Rising rates aren’t necessarily a bad thing for the housing sector as long as the increases are measured and supported by economic growth and lower unemployment. Overall as we enter the new year, there still exists an outstanding opportunity for homebuyers.


CONFORMING (up to $417,000)
30 year fixed: 4.875%
15 year fixed: 4.25%
7/1 ARM: 4.0%
5/1 ARM: 3.625%

HIGH BALANCE CONFORMING (up to $729,750)
30 year fixed: 5.125%
15 year fixed: 4.25%
7/1 ARM: 4.125%
5/1 ARM: 3.75%

NON-CONFORMING (over $729,750)
30 year fixed: 5.375%
5/1 ARM: 4.25

Some interesting facts

According to Carol Radoni of Bamboo consulting, the decline in wealth in the United States this past year is due to the decline in the stock market, not the decline is real estate values. 

·         Household net worth per the Federal Reserve was at 58.5 trillion, which was down 2.8% from 1 year ago.  That leaves the average net worth at about $182,000 per person.

·         We are saving 5-6% currently, compared to 2% in 2007

·         We are more cash reserves, roughly 7%, which is the highest it has been since 1963.

·         Our debt is about $13.5 trillion, which is 111% of annual disposable income--down from 130% in September 2007.