Berkeley Realtors
 Your real estate team for Berkeley, Albany, Kensington, El Cerrito and Oakland

Heidi and Jerry Long
Red Oak Realty
1891 Solano Avenue, Berkeley
Direct Line: (510) 835-6218
E-mail: |

Bay Area Real Estate Market News

©Jerry Long - Spring 2005

Right now, we would say, the real estate market is a good one for both buyers and sellers.

How can this be?

As everyone knows, the market has remained unexplainably hot, and prices are still going through the roof. Yet, everyone seems to agree that this state of affairs cannot go on forever, that there has to be a turn-down sometime, and maybe that sometime will be the near future.

We have worked with a few clients in the past few years who just couldn't bring themselves to pay what seemed liked outrageous prices. They decided to take a break until prices came back down. This, of course, has not happened. These people have progressively found themselves farther and farther away from being able to afford a house. Not only that, when they've seen the roughly 20% per year appreciation in the areas where we work, they cannot help but want to kick themselves for not having bitten the bullet when they had the chance.

Fortunately for us, most of the time we've been able to rejoice along with our buyers as their houses have increased in value beyond their wildest dreams, thus offsetting the fears they had about being able to afford these houses when they first bought them. At the same time, for most of this period interest rates have been going down so that not only are these people living in a house worth substantially more than they paid for it, but it's also been possible for them to refinance their loans so as to be making smaller payments than the ones they started with.

So much for the past. Now, what about the news?? Well, prices are still going through the roof. That part hasn't changed. We've had clients sell their houses and move to Massachusetts, to Atlanta, to Portland, to Port Townsend, to Seattle. They've all happily raved about how much more they were able to buy in these places.

Prices are at an all-time high so there has never been a better time to sell. It's still quite possible to parlay one's appreciation into a bigger house, nicer neighborhood, smaller house with cash leftover, etc. People who are selling because they need a larger house may think about taking advantage of low interest rates to refinance, pull out equity for the down payment on the new house, and keep the original house as an investment property. It's the low interest rates that make this possible.

How can this state of affairs be good for buyers? Consider the buyer who, right now at the end of January, can afford around $3,000 monthly for a mortgage payment. With 90% financing, a $550,000 house would cost that buyer around $2,850 per month for the mortgage payment. A $600,000 house would be around $3,115. A year from now, if interest rates rise 1%, that same buyer will pay about $3,175 a month for the $550,000 house, and $3,475 for the $600,000 house. That's a difference of $325-360 a month. It also means the $600,000 house is cheaper to own at today's rates than the $550,000 house will be if interest rates go up.

One thing is for sure. It is infinitely more likely that interest rates will go up than that house prices will go down.

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