Southern California home prices have been on fierce decline for a few months now.
All of
Southern California has been affected by this market slump but many areas have been hit much harder.
The areas that have been hit hardest are the areas that have a high percentage of first time buyers.
These new homeowners have seen their homes that they had just purchased lose up to 30% of their value in a few short months.
This is causing them to have no choice but to walk away from these homes.
The areas that have not been hit hard are areas that have relatively low new homes being built, many of these areas have not seen any decline in value at all.
What many people are asking is how much lower the market will fall and for how long before it turns around. Many experts predict that the housing market in Southern California has a ways to drop before it stops falling. Five experts recently interviewed in a LA Times article seen here all said that the market will still fall between 10 and 25 percent. Most also agreed that the market will not stop falling until late 2009 and possibly even 2010.
Many people that are interested in buying new homes are excited to see home prices fall however since they feel they will be able to buy at a very low price. However because of this market slump, many mortgage rates will be set at higher rates which they will be paying for over the life of their mortgage. I think the market will begin to correct when people stop buying property to as investments but buy property that they plan on living in for an extended amount of time. Only time will tell just how serious this housing slump will be but hopefully it will correct itself before it leads to more damage in other sectors of the market.
2 comments:
The instability in the housing market is another example of the great economic changes we are enduring as a country. I have noticed an increase of "DYI" or do-it-yourself programming on HGTV, TLC, Bravo, etc. Additionally there are shows like "flip that house" that follow those out to make a profit in the russian-roulette game of "house-flipping." There is no question that $1 million won't take you very far as if you're looking to buy a home in a prime real-estate market in Southern California.... unless you're willing to move to the valley. The question "how low can you go?" is a valuable one because how low are homeowners willing to sell their homes for when they know they how expsensive their next home will be. I hope that the market decides to give us a break sometime soon!
It's hard to guess when the housing slump will get better. Buying a house at any time is a risk. For some families they sign into unbelieveable mortage rates in order to move in, and eventually have to pay the price. I believe that within the next 6 months everything will get better, but investors are cashing in on the low home prices to only sell them at a higher price when the market flips.
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