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Elaine Abercrombie: Real Estate Market on the Rebound

With interest rates likely to rise this year, now is not the time to hesitate in making your purchase

Phew! After four years of declining home sales across the country, the numbers finally appear to be turning upward — with closed sales and pending contracts at above-normal increases.

Elaine Abercrombie
Elaine Abercrombie (Roe Anne White photo)

In particular, first-time buyers helped buoy the market by taking advantage of low prices and interest rates, as well as the $8,000 tax credit offered by the federal government.

At least for now, home prices remain attractive, and mortgage payments as they relate to income are more comfortable.

All of the information seems to point to the fact that home prices have actually overcorrected downward. What does that mean? It indicates that many markets may experience a price “snap back,” with values increasing a lot more than the historical average of 4 percent appreciation per year.

Our local market has never dropped to lower lows; however, it reaches a higher plateau with each real estate cycle. This stair-stepping value is another reason investors are attracted to our area.

Some factors may continue to make some buyers cautious, mostly declines in retirement savings and a lukewarm economic recovery with unemployment hovering much higher than normal nationally. Now is not the time to hesitate, as mortgage interest rates are expected to rise as the year progresses.

We can expect the momentum of home sales to continue, especially with the extension of the tax credit through April and the fact that qualification is no longer limited to just first-time buyers. Prices and interest rates will rise this year, bringing buyer confidence to an all-time high.

The pressure cooker of pent-up demand is about to blow its top! It’s better to be five minutes too early than one minute late to make one of your most expensive purchases.

Elaine Abercrombie, a broker with Village Properties Realtors, is president of the Santa Barbara Association of Realtors. She can be contacted at .(JavaScript must be enabled to view this email address).

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