Earlier today we discussed the stats that showed median prices in Southern California as a whole were down 19% last month from their peak in July of 2007, also touching on our projections for the rest of this year (“So Cal Price Update”).
Frankly, in our primary market areas of West Orange County and Greater Long Beach, we believe prices actually peaked in the summer of 2006, based on comparable homes. DataQuick’s 7 county numbers were skewed by the huge foreclosure problems in the Inland Empire, as well as inherent flaws in their median pricing system. The Orange County Register’s Real Estate Blog has a good summary and explanation of 8 different indexes & their most recent reports for Orange County. DataQuick showed the greatest year-over-year decline (16% in O.C.), while the other indexes ranged from 15% to 6% drops.
Basically, we still believe we’re in uncharted territory & nobody knows what’s next, as we wrote back in November (”How Low Will Prices Go?”).
Our recommendation for Los Angeles and Orange County buyers and sellers is still to focus primarily on where you are in life, not where the market is. Since nobody really knows what’s next, don’t get too obsessed with what the future holds.
If selling makes sense, why roll the dice & wait up to six years (or more?) for prices possibly to just get back where they are now?
As for buying, if you can buy a home that works for you with a 30 year fixed loan, why gamble on rates or prices going up, or waste several years of your life gambling things will get worse before they get better. (see “What to Do When Nobody Knows What’s Next.”)
We’re not saying it’s time to buy for speculative reasons, and we certainly wouldn’t be trying to “flip” right now unless I got an extraordinarily good buy (and that does happen in market’s like this). I’m certainly not saying we’ve hit bottom.
We’re saying nobody really knows, because we’ve never seen anything like this. For example–we think the Fed caught just about everybody by surprise this week with their creative moves to enhance liquidity.
Who know what might come next? If some lenders were smart, they’d just shave $100,000 off the loan if needed to avoid foreclosure. They’d certainly drop interest rates or eliminate the obscene resets they have coming. (Of course, if they were smart, they wouldn’t have made 100% loans to subprime borrowers without income verifications when the market was obviously peaking, but maybe they can learn. . . .)
We’re saying nobody knows what the future holds, especially this time. So if you’ve always dreamed of a home on a lake in Lake Forest & find one that works for you with 30 year fixed financing, & if you’ve got a stable job & aren’t moving, why not make an offer & start living your dream? If it works, maybe you should let your life determine decisions, not speculation. Here’s a novel thought: think of it as a home, not a piggy bank!
Ditto to sellers. Forget what your neighbor got 2 years ago. Prices on your next home are down too, and so are interest rates. Maybe you can’t get the triple garage, but maybe you never would. If everything else works, give it a shot. You’re not getting any younger!
We’ve watched the market and buyers and sellers for 30 years, and we see some unique opportunities right now that may not last. And we see too many people making decisions based on ego or gambling in stead of getting on with their lives.
Feel free to call 562 822 7653 or simply comment if you want specific input on your situation.