Real Estate Good News

By: Tony Barns

Sales of existing homes last month rose for the first time in half a year, adding fresh evidence that the housing cycle may finally be bottoming out after nearly three years of correction. The national gains in resale's announced on Monday were 2.8 percent for single family homes and 3.7 percent for condominiums. Total sales hit 5.03 million units, though Wall Street economists had predicted another decline to a consensus estimate of around 4.8 million units. The latest sales gains were created by a decline in the national median price of homes sold which is down by 8.2 percent.

You might think an 8 percent drop in prices is terrible. But let's face it: The only way we're going to burn off that 10-month overhang of unsold houses on the market is through more affordable, more realistic prices pulling buyers off the sidelines. There's another factor at work pulling down the national median number: Relatively more houses are selling in places like Texas, North Carolina and Utah, where prices are moderate and affordable, while there are relatively fewer sales in ultra-high-cost California.

So the median price may be lower, but it's not just because home values across the country are crashing. The mix is different, so the median price is a lower number. Low-cost mortgage money is also definitely helping to fire up sales. Average 30-year rates declined to 5.875 percent last week and any time mortgage money is under 6 percent, you're going to see more home buying.

Sales in California are likely to improve in the coming months as the new "super-jumbo" FHA, Fannie Mae and Freddie Mac mortgages start hitting the street. FHA's mortgages should be especially popular in California, where the median home price in some local areas like San Francisco exceeds $700,000. Thanks to FHA's low 3 percent minimum down payment requirement, Californians should be able to buy a $700,000 house with just $21,000 down and walk away with a 6.5 percent 30-year fixed rate.

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