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What will another Fed rate cut mean to California home buyers?

February 28, 2001

"If you're planning to buy a home, the current economic slowdown provides a window of opportunity" says former Fed economist Stuart Gabriel, currently the Director of USC's Lusk Center for Real Estate. "This represents a needed improvement in market conditions for potential homebuyers in California."

Not only will another rate cut further reduce mortgage interest rates, but the rate of increase in California home prices is likely to decline in the near term, adds Gabriel.

The retrenchment in the stock market and related reduction in household wealth will put some potential buyers on the sidelines, reducing demand and creating a temporary easing in California's housing demand-supply imbalance.

That means more opportunity for active buyers to find homes at lower prices -- for a time. Despite better home-buying conditions currently, the state still faces the long-term problem of producing an adequate supply of affordable housing.

"Many Californians cannot afford a home, and we're only producing about 60% of the housing needed to meet demand," says Gabriel.

To discuss the effects of the anticipated Fed rate cuts on California's housing markets, and the housing outlook, contact Gabriel at (213) 740-5000.

NOTE: If he's out of the office, please leave a message with his administrative assistant Chris and let her know your deadline. Or send him an e-mail at