Real Estate Market Outlook Continues to Point to a Slow Recovery

Homeowners expecting to see a rise in home prices will not likely see much of a jump this year.

The California Association of Realtors reported in late April that demand for homes in California had declined in March from the same month a year earlier. In Orange County, pending sales were down 7.3 percent from a year earlier.

Inventory has built up slightly, so prices are expected to stay mostly flat. Economists at California State Fullerton predict that the median home price will rise by lass than 5 percent in 2011.

Also, residents wanting to move up to larger, more expensive homes will be thwarted by slower economic growth. The forecast calls for just a slight rise in home prices and that will likely be toward the end of the year.

The median price of a Fountain Valley home has fallen slightly in recent weeks from $594,950 on April 17 to $575,000 on May 1. The average number of days that homes are on the market stood at 124 on May 1, compared to 118 days on April 17.

eVantage Real Estate reports that local conditions currently strongly favor of the buyer. Also, with several months of inventory available at the current sales rate, buyers should find ample choice.

The percentage of Fountain Valley homes in which prices have been reduced was at 42 percent on May 1, compared to 36 percent on April 17. So why aren’t more buyers out there snatching up homes? Because investors have been busy taking advantage of the market.

However, investors are looking more toward foreclosures, bank-owned homes and quick sales. Analysts say they are primarily interested in lower-end homes that can be purchased cheaply. Absentee buyers are a force on the current market, comprising about 25 percent of sales in Southern California. And many investors are bringing cash when they decide to buy a home. Cash buyers make up about 30 percent of sales in Southern California.

In terms of non-investor buyers, FHA low-down payment home purchasers are another important segment of the sluggish market. FHA still offers low-down-payment programs, but its rules have become more restrictive. FHA now requires a FICO score of 580 in order to obtain a low down payment of 3.5 percent of the price of the home.

Other government-backed programs like Fannie Mae and Freddie Mac, which also provide low-down payment opportunities, may be phased out as a government cost-cutting measure. That could slow home sales for some time to come.