Good news for home shoppers. It’s now a buyer's market for real estate

BY JAMES F. MILLS

The real estate market has become a buyer's market and things have only gotten better now that the Federal Government has lowered the interest rate. That seems to be the consensus among realtors and mortgage brokers.

“When you see a lot of inventory on the market and sellers are cutting their prices, it's a buyer's market. That's the situation we're in now,” says Jeff Cook, senior loan officer at Metrocities Mortgage.

Kelly Lynch, a loan specialist with KPL Select Companies, adds, “Prices had escalated to the point where they were out of reach for first-time home buyers. But now they're coming down to more affordable levels.”

“The feeding frenzy we had a couple of years ago has slowed down because of the sub-prime issue,” says realtor Jim White of Ultimate Life Living. “There's a lot of inventory left unsold. If you have the cash, there are great deals right now.”

Experts say the ideal real estate buyer is someone who has cash readily available, has great credit and doesn't have to sell a house before buying another one. But for people who may not have one or more of those things, there's still hope. The United States Government is taking steps to help stimulate the economy which will make things easier for home buyers.

In late January, the Federal Reserve lowered the prime interest rate by 1.25%. For people with adjustable-rate mortgages (which are often tied to the prime rate), that will mean lower mortgage payments. People tend to get into adjustable-rate mortgages when interest rates are high, or when prices are high. Adjustable rates offer low initial payments, but those payments change as the rates adjust up or down. People tend to get into fixed-rate mortgages, which offer the security of payments that don't change, when interest rates are low.

Meanwhile, Congress is expected to approve an economic stimulus package that raises the conforming loan limits for homes, which will make it easier for first time buyers to qualify for lower-rate mortgages. “The conforming loan increases will mean greater potential savings for people purchasing and refinancing,” says Cook.

However, because of the sub-prime mortgage mess, lenders are being more cautious about giving out loans. They're increasing the amount people must pay upfront and requiring higher credit scores.

“The best thing a potential buyer can do is review their credit report and see if there's anything they can do to get their credit score into the high 600s or low 700s,” says Lynch. “And the more cash reserves you have, the better.”

But should people hold off, waiting for interest rates to go even lower? “Don't count on it,” says Cook. “Your best chance to lock in the lowest rates since 2005 is now.”

And following that old real estate adage, this buyer's market is all about “location, location, location.” In the Los Angeles area, the biggest price drops have been seen in moderate-priced neighborhoods. Prices in upper-income neighborhoods haven't seen much of a drop yet.

Foreclosures have been increasing thanks to the sub-prime mortgage mess. So, many good deals can be found as banks try to recoup their losses. However, banks aren't dumping all those foreclosed properties on the market all at once, Lynch notes, “They're not glutting the market. They're trying to avoid a fire sale.”

White suggests being on the lookout for “quick sales” where owners who know they're about to be foreclosed sell their property at a loss to avoid having their credit damaged by a foreclosure on their record. “We're seeing a lot more quick sales come on the market,” White notes, “especially downtown.”

And what are the hot areas for gay and lesbian buyers?

“A lot of gays are buying in the Valley now,” says Lynch. “Not the heart of the Valley, but places like Sherman Oaks, Studio City, Valley Village, Eagle Rock, and Atwater Village.”

White believes the next hot market for gays will be downtown where many older buildings are being converted into lofts. “Downtown is a fresh and exciting area, there's a lot happening there,” he says. “There's a sense of community, a sense of a new area that's waiting to be shaped and formed.” White estimates currently about 15 percent of the downtown population is gay and expects that number to increase.