Real estate professionals in areas such as La Jolla and North County are looking for markets to stabilize and even improve slightly in 2010, but such factors as rising interest rates and a potential wave of new foreclosures could put a damper on things.
Some mortgage experts are forecasting a rise in interest rates as early as this spring. As of this week, 30-year, fixed-rate mortgages were averaging about 5.25 percent, according to national surveys.
Bob Angello, a broker with Willis Allen Real Estate in Del Mar, said pundits are predicting that rates could climb above 6 percent by March.
"The truth is, anyone looking to buy, move up or refinance must do it before spring. Interest rates are at an all-time low," he said. "Once the government stops purchasing mortgage-backed securities, which is the reason (rates) are low ... then the rates will rise. History tells us once they start to rise, they will do so quickly and dramatically."
It varies
Factors such as buyer demand - and available inventory - can and do vary from community to community, and by the level of home prices. For example, in communities where homes are available for $500,000 or less, inventory is low and prices could increase in 2010, according to local real estate professionals. However, inventory remains high and demand sluggish in some higher-end communities where homes sell for $2 million or above.
Claudette Berwin, broker-owner of Gallery Properties in La Jolla, said activity, from inquiries to showings, was strong during the first week of January, which she considers a good sign for the year ahead.
"If you want the best buy, at the bottom of market with best rates, that's now," Berwin said. "If you wait, you're playing Russian roulette."
The start of a recovery?
La Jolla broker Jim Bennett of Realty Experts said the upscale seaside community has avoided the worst of the fallout from the bursting of the housing bubble, and is poised to see the beginnings of a recovery in 2010.
"I think at the end of the year, if we look back, we will see a small improvement," Bennett said. "There is more activity, more showings, people writing offers. (Buyers) are still looking for really good deals, but they're out there now, people are doing things."
Among the factors that could put pressure on higher-end markets is the relative difficulty of obtaining so-called jumbo loans, due to tighter lending requirements established by banks.
Amy Green, co-owner of Coastal Premier Properties, which is based in Carmel Valley, said the prospect of rising interest rates, while potentially dealing a blow to the housing market, could stimulate demand in the short-term.
"The threat of interest rates going up may help put a little drive into them, motivate (buyers)," Green said. "My advice is if they see something and the numbers work, it's your home, so go for it."
Those seeking to buy properties and "flip" them for a quick profit face the biggest risk, Green said. "Some will do well, but if there's a big release of inventory, they could get caught."
More sales predicted
Supply outstrips demand in Rancho Santa Fe for homes in the $2 million-$3 million range, and for homes above $3 million, said Mike Taylor of Dougherty & Taylor Prudential California Real Estate in Rancho Santa Fe. Demand in the Ranch reached an all-time low in 2009, with 148 sales of homes on the multiple listing service, or MLS.
The number of annual home sales in Rancho Santa Fe has declined steadily since 2004, when 352 sales were recorded, Taylor said.
"I think in terms of number of sales, we are broaching the bottom. The ones who do want to sell will find the price that entices buyers off the sideline. I would predict we will see more sales at still adjusting prices," Taylor said.
"I do think 2010 will be the year when we start to feel ourselves coming out of everything. I think it's going to be a great time to buy," Taylor said.
Jason Barry, of Barry Estates Inc. in Rancho Santa Fe, said "time will tell" if interest rates do indeed rise in 2010.
Buyers 'looking for a deal'
But for now, Barry said, prices have dropped and demand has increased.
"The overwhelming sentiment in buyers is they're looking for a deal," Barry said.
A year ago, he said, buyers were scared away from the housing market by the fallout from the financial meltdown on Wall Street. Since then, he said, many people in the financial services industry have recouped much of the money they lost and are coming back.
"They're feeling better about it. Sentiment has changed," Barry said.
If the stock market remains strong, demand will increase, which could lead to slight price increases in the housing market, Barry said.
"I think we're cautiously optimistic. We're hopeful the worst is over," Barry said.
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