2006 Housing and Economic Forecast

Seems that all of the talk of a real estate bubble may have popped itself. Expectations for 2006 look quite familiar - in fact, much like the results we had in 2005. The California Association of Realtors released their Housing and Economic Forecast and say that the economic factors look reasonably stable and while there may be a 2% decrease in the number of homes sold, prices should hold steady.

CAR suggests that "it takes a major economic disruption or a rapid increase in interest rates to cause a price decrease in the California housing market. The statewide median home price has increased by an average of 9 percent annually since 1970." The number of second/vacation homes has been on the rise for five years straight (and most of the last decade) and it looks to continue that through 2006.

Overall, it was a cautiously optimistic outlook for 2006 with expectations of steady economic conditions, low but rising interest rates and unchanged inventory levels. For the Coast, I'd expect slightly increased inventories and less-than-normal price growth.

Remodel Before You Sell? Maybe...

Realtor Magazine does an annual report on the cost versus value of remodeling your home and the 2005 results are interesting - especially if you're looking to sell your home soon. What's most interesting is the effect of location on the return you can expect from your investment. If you live in the West, you have a much better chance of turning the cost of the project into a profit than if you live in the South or Midwest - but each of the 58 cities studied had quite variable results so check out the details of the report in the link below.

The San Francisco market showed the best overall returns on nearly all of the remodel projects which include bathrooms, kitchens, siding, decks, etc. Of course, many factors affect the true value of the project and you also need to consider the cost of NOT doing the project. Keeping up with neighboring homes may necessitate a remodel in order to make your home saleable in the first place. By not remodeling an old kitchen or bathroom, you can turn the sales cycle into a long ride...

Here's the article:
Feature: 2005 Cost vs. Value Report

Shine On!

Solar power has been around for billions of years, but Californians are finally being financially encouraged to harness the stuff. And Governor Schwarzenegger may finally found something to hang his political sunhat on - he started the "Million Solar Rooftops" initiative and now has the backing of California's Public Utilities Commission with a 3 to 1 approval of the measure.

The bottom line is that builders and homeowners can receive up to one-third of the cost of installing a solar system on their homes - one that will cost about $27,000. The system should provide enough power for a 2500 square foot home to zero out it's annual electricity costs by running the meter backwards during the sunny days (California gets a lot of sunny days).

Initially, the incentives will be targeted on larger projects (like new office buildings or apartment complexes) and over the ten year period, existing residences will begin taking their share of the $2.9 billion program.

But the issue here is, will it be worth it? It takes a lot of $200 electricity bills to make up for the $27,000 investment in free power - about 11 years worth (or 7 years with the rebates). But as energy costs continue to rise as they have in the past, it may be well worth it if you plan to be where you're at for a while.

Plus, it's the right thing to do for the environment - and that's not always the right economic choice...