Home prices not cooling off anytime soon

Bank Leumi does not believe that Israel's hot real estate market will cool off anytime soon. The bank said, in an entry on its blog, that high demand for new homes, combined with the low supply, do not indicate any change in the current upward trend in home prices.

Bank Leumi says that sales of privately-built new homes rose in October and November 2010, after slowing somewhat during the third quarter. New home sales rose 8.3% in January-November, compared with the corresponding period in 2009.

The bank says that one of the factors driving new home sales is low mortgage interest rates. The average interest rate on CPI-linked mortgages is a low rate of 2.2%. The average interest rate on five-year mortgages is 2.05%, and the average interest rate on 20-year mortgages is 3.16%. Bank Leumi says that, for now at least, it seems that Supervisor of Banks Rony Hizkiyahu's efforts to make mortgages more expensive are not working. Furthermore, the drop in the average interest rate on CPI-linked mortgages has been paralleled by an increase in the annualized pace of credit for housing.

Source Globes