Loading ...I guess that seals it. The National Association of Realtors, otherwise known as the National Association of Real Estate Optimists, is forecasting a nationwide decline in the median price of resale homes of .7% this year (that’s .7%, not 7%, or 70%).
The California Association of Realtors is predicting a 2% decline in resale home values this year in California. Others predict sharper drops.
Keep in mind one thing. Real Estate can be analyzed and studied, and be the source of endless predictions and forecasting. But it is still a local business. Or more accurately, a combination of many “micro-markets”. In Northern California, for example, you have the major metro markets of the bay area. Because of the limited supply of land and the incredibly strong economic engine of the bay area, which is as diversified as they come, demand for housing is constant, and the supply of housing in the metro markets is limited, either by geography, or political will, or both. These markets will always perform well, but are of course subject to fluctuations. And as I have written about several times, there is the other Northern California market, the “secondary” markets where land is plentiful, but where the high paying jobs (hi-tech, bio-med, engineering, etc) are not in abundance. The secondary markets, including Tracy/Manteca, Stockton, Solano County, and Sacramento, have been struggling since the market peaked in 2005, and in general have seen more price erosion than the metro Bay Area. An additional factor is that these secondary markets have seen an explosion of investor activity in recent years, with speculators and small investors comprising a much larger share of the market activity than is the case in the primary markets. This adds greatly to the volatility of the market. And with the recent subprime mortgage troubles, many of the potential buyers for these less expensive areas will have a difficult time obtaining mortgages.
So it is not inconceivable that California as a whole sees a decline in the median price, and the Bay Area remains strong. They really are 2 different markets. In times like this, it is always best to remember the ‘ol law of supply and demand. In the prime bay area markets, there is a steady demand for housing, and a limited supply. While we certainly could see a flat market, or even some price erosion, there is certainly not a market in the country where I would rather own real estate.
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