The four primary economic indicators that affect real estate are interest rates, job market, affordability, and consumer confidence.

By analyzing these, we understand why the market is improving, and we can predict where the market is trending.

Interest rates -Your monthly mortgage payment is directly affected by the interest rate you pay. For example, if you have a $300,000 mortgage at 5% amortized over 30 years, your monthly payment is $1,610. If your interest rate is 8% on the same amount, your monthly payment is $2,201. A $591 monthly payment difference makes it clear that interest rates are important.

Federal Reserve Chairman Bernanke has indicated that he intends to keep interest rates low...at least for the next few months.

Job Market - Obviously, people need income in order to buy a home. With unemployment over 10% in California, many potential homeowners are unemployed or in fear of losing their job. There is definitely a need for the job market to grow stronger.

Affordability - Over the past four years, home prices have depreciated from 30 to 40% in most areas of California. We may never see prices this affordable again. In fact, in the lower price ranges, we are already experiencing some appreciation.

Consumer Confidence - This is, perhaps, the most important factor of all. When consumers believe the market is good, they are more inclined to make purchases. With interest rates very low, prices down, and consumer confidence on the rise, it is easy to predict a bright future for California real estate.

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