What does your crystal ball tell you about SoCal home prices? (Santa Barbara: property taxes, property)

[streetscenes]

Originally Posted by EscapeCalifornia

more like a 1700ft house in Huntington Beach or Torrance.

Prices for houses in these areas will (or are) coming down but they won't become "affordable" in any normal sense. Basic supply and demand. The supply issue is that there is no more buildable land in the areas you describe (20 miles from the coast, etc.) with only some minimal infill type of development going on. That locks the supply of this housing type at a pretty finite number. The demand issue is that there are still alot of good paying jobs and alot of 2 income households that can afford to buy in these areas. Unlike the last housing bust when the large aerospace firms laid off well paid engineers and assembly workers by the thousands the current bust does not have the same employment issues, at least not yet.

[Humanoid]

So with a bubble and a subsequent bubble burst, it has been ten years and linear appreciation would have had an effect anyway.

5% appreciation is too high, nothing has really changed in TO over the last ten years. But also, you are just playing games with inflation. Even if it did appreciation at 5% much of that is inflation. Unless someone happens to the area that makes it more desirable houses in the long term will appreciate at the rate of inflation.

but it all depends on how badly the sellers want to sell and what they will settle for.

Normally declines in housing markets are slow because prices are sticky, for the sort of reasons you are stating. But foreclosures change the dynamic, that is why areas with a lot of foreclosures have seen 30%+ price declines. Once there is enough foreclosures to drive the price down it becomes very difficult to sell at the higher price even if you find a willing buyer. Unless they have a lot cash they are unlikely to get a loan as the house will appraise below the sell price.

current bust does not have the same employment issues

This is actually not true. Jobs are rapidly being lost in construction (many of these are good paying I should add) and the financial sector. California's unemployment rate is getting dangerously high:

California unemployment hits 6.8% - Los Angeles Times

The supply issue is that there is no more buildable land in the areas you describe (20 miles from the coast, etc.)

This is not the case. For example both Southern Orange County and North San Diego County have plenty of such land.

[BRinSM]

All I know is that my wife and I are getting a decent amount of money put away for a down payment and we are hoping to buy sometime next year, preferably summertime. Hopefully the prices in the neighborhoods were are interested in have settled by that time.

[impala666]

Right now we are checking out the Monterey area and to date Monterey county is down 47%. That is a huge drop! Of course this will vary some from neighborhood to neighborhood. But none the less this is very significant change.

If that`s the case I know plenty of people who will be snapping them up as investments real soon.

[MtnSurfer]

Originally Posted by impala666

Right now we are checking out the Monterey area and to date Monterey county is down 47%. That is a huge drop! Of course this will vary some from neighborhood to neighborhood. But none the less this is very significant change.

If that`s the case I know plenty of people who will be snapping them up as investments real soon.

Here is a good reference regarding Monterey's current RE drop: Realtytimes - Hot Market

[MtnSurfer]

The most recent UCLA Anderson Forecast states that High foreclosure rates are expected to continue into 2009 with a "normal" market "still a long way off."

The report says California is about half way through a three-stage market slump with a mountain of inventory to get through before there's a full recovery. Read the story here: California's Wild Wild West

[the city]

Woah, most of this confuses me only cuz I havent taken economics in high school yet...but from what I gather California's housing market recession will start recovering in 2009 and be better in 2010. and at that time houses would be affordible. some economists are predicting that 2010-2020 will be good years for california's economy. yet, they say after this recession the market in california won't be good as it always has been. growth in rural markets and inland markets will be slowed, and no new market areas will come fourth. which means, if an area is rural now, then it will still be rural area for a long time. areas like LA that r growing, will probably continue to grow.

[k374]

Originally Posted by Charles

We paid $330K for a really nice home/neighborhood/school district (2200 sqft, $150/sqft) in Thousand Oaks in 1997. It went up to $931K ($423/sqft) in 2006 when we sold it. If the $330K was "normal" and "affordable" then, with 5% appreciation, that $330K home would be worth around $538K today, ten years later. So with a bubble and a subsequent bubble burst, it has been ten years and linear appreciation would have had an effect anyway.

ah alas it does not work this way. you cannot just apply a blanket 5% appreciation like that. They appreciate with income growth minus inflation...i.e. the growth of income in REAL terms. In the last 6-7 years income growth has been almost zero, infact income is on a declining trend while there has been runaway inflation of late.

Inflation causes affordability to decrease, when your groceries, gas, energy, transportation, health care costs are up you can afford much less home.

So the intrinsic value of your $330k may perhaps be $380k but I will guarantee not anything more than that. The 10year time period is inconsequential. Look at Japan, after 20 years Real Estate there is still in the dumps.

Another thing to remember is that real estate markets frequently overcorrect on the downcycle, so it is entirely possible that your home may once again be $330k ;-) One more final reason why this cycle may be quite disastrous is access to information through the internet. This is the first downcycle where people are able to get the maximum amount of information from the internet and be very influenced by it. Don't underestimate the power of this... psychology is the biggest player of the markets.

[MtnSurfer]

Originally Posted by k374

Another thing to remember is that real estate markets frequently overcorrect on the downcycle, so it is entirely possible that your home may once again be $330k ;-) One more final reason why this cycle may be quite disastrous is access to information through the internet. This is the first downcycle where people are able to get the maximum amount of information from the internet and be very influenced by it. Don't underestimate the power of this... psychology is the biggest player of the markets.

This is an interesting observation. And I agree with your assessment of the power of information during this new down turn. Perception is everything on Wall Street for example. So when 'Whisper Numbers' are leaked out people act. Then this perception leads to the new reality of change.

All one has to do is turn on their computer and and go 100s of great news sites such as the Wall Street Journal online to read articles and watch streaming videos which summarize current conditions.

[EscapeCalifornia]

Originally Posted by MtnSurfer

This is an interesting observation. And I agree with your assessment of the power of information during this new down turn. Perception is everything on Wall Street for example. So when 'Whisper Numbers' are leaked out people act. Then this perception leads to the new reality of change.

All one has to do is turn on their computer and and go 100s of great news sites such as the Wall Street Journal online to read articles and watch streaming videos which summarize current conditions.

Yeah its really amazing how much raw data, processed information, and opinions people have access to today thanks to the Internet. 20 years ago, people not in the business only knew what their realtor told them (its always a good time to buy, jump in!), a monthly newspaper article summarizing the market, or an editorial in the paper.