Which would you like first? The good news or the bad? How about the bad and the even worse?
According to the LA Times’ October 15 edition, the California Association of Realtors’ 2009 forecast will include both. Maybe.
Sales will go up- that’s the good news; prices will go down- that’s the bad news. Of course, if you read closely, it’s all pretty grim news because the projected increase in sales is really due to all those foreclosures. This is particularly so in the Inland Empire where the CAR Report found, according to the LA Times article, that sales increased by 143%– mainly due to increased foreclosures there. The other part of the news is the ‘fun with statistics’ part: in 2007 sales dropped statewide some 26%. So, if we project a 12.5% increase for 2009, as CAR does, then we are really talking about re-gaining a little less than half the ground lost last year.
"We’re not in a ‘happy days are here again’ scenario," Leslie Appleton-Young, CAR’s chief economist, is quoted as saying. I’ll say. Not by half!
The other side of the gloomy equation predicted by CAR has a few other surprises as well. Credit right now is as tight as a big bass drum head standing out in the rain all day. You must have nearly perfect credit, lots of money for a down payment, and real live proof of income- no more liar’s loans- to get a home loan today. Of course, you could have perfect credit if you had one credit card and you used it once and promptly paid it back, but, then the lenders would complain that you do not have seasoned credit. "Jumbo conforming" loans in the $417,000 to $729,750 range will prove very difficult to get and this should all but kill the market for sales of homes in what the article calls “California’s pricier areas,” unless your Uncle Leo just died and left you a bundle or you have a whole lot of cash stuffed in your mattress
Now, here’s the real gut buster. CAR predicts that median home prices will fall some 32% this year, but only some 6% for 2009. And then, just when it looks like we could actually begin to come out of the woods, a new wave of those pesky ‘ol adjustable mortgages will re-set: Slam! The sound of many many cash registers closing. It may yet be until 2010 before we see median home prices in California begin to climb out of these doldrums.
The other wild card will be interest rates. If they stay low and credit markets ease up a bit, that still could cause median home prices to rise if the very complex, whirring gears of a global economy somehow can all synch up with one another.
So, it sounds like we are back to the days when a house is a home that you live in and try to pay off and not first and foremost an investment. The way California’s overheated real estate market ratcheted up over the years from 2003-2006 and even into 2007, I suppose we need a break. It was also good enough for California from after World War II through the 1970’s until things got crazy.