The Energizer Bunny

It just keeps going and going… the real estate market, that is.
Interest rates, defying all predictions, are plunging. The benchmark 10-year T-note, which largely determines mortgage rates, dropped to under 3.9% last week, down from 4.7% a year ago. Analysts are now predicting 3.5% to 3.8% by year end. When the stock market gets scary, investors buy interest bearing bonds, which in turn ups their price and lowers their yield. That’s pushed back the 30-year fixed rate to just over 5% currently, the lowest in 40 years. That’s down from 6.3% a year ago. I'll guess with you. It’s a whole new world.

THE BOOM CONTINUES

California housing has generated $1 TRILLION in increased home equity in the last 5 years. For someone who plunked 15% down on the then median priced home of $230,000, the return on equity would be nearly 1000%. We now have a better feeling for how much new wealth home ownership has created. The median home price in CA just hit an unprecedented $509,000. Sales are up 5.1% over a year ago. The average U.S. home appreciated 12.5% in the first quarter versus the same period last year. California home prices are up 19.2%. The Pending Sales Index, homes put in escrow, has risen to the highest level on record, up 9.2% over a year ago. More and more builders are limiting sales to buyers who will occupy them to squelch speculation. Developers could sell their new homes in hours instead of days if they didn't. They are trying to create stable, family communities, not a commodity that investors buy, rent out, and later resell at a profit. Forget the flaky stock market. Real estate is where it’s at.

ONGOING

Meanwhile, pity the poor first time buyers who continue their struggle to get on board. All over the state young working couples are coming up empty as they reach for the American Dream of homeownership. Just when they think they can get in, it slips out of reach. The trade-up buyers are in great shape with their huge appreciated equities. Any Chico home now pretty much starts at about $250,000. Of the $87 million in current listings, the average price is $453,000, the median $379,000. There are 33 homes from $600,000 to $3.2 mil. Recently a S.F. home listed at $4.25 mil, after pulling multiple offers, went for $4.7 mil, all-cash, with a 3-day close. Simply extraordinary. Based on what’s happening now, I wouldn't be at all surprised if Chico home prices increased 15% this year. Our California Assn. of Realtor’s chief economist has already predicted 20%.

We are clearly in an incredible, unprecedented real estate boom of all time.