Cali takin' the cake with the WORST EVER real estate market.

[Wagner]

Ouch.

http://money.cnn.com/galleries/2008/...rkets.fortune/

[JGQ]

I know it sounds bad. But these idiots who are projecting 25% decline in prices are the same idiots that never saw this mess coming!! All what they are doing is destroying the consumer confidence in the real estate market and delaying any market recovery.

When someone sees a projected 25% decline, why would they buy in that markets? AT the same time, some might think that it is finacially wise to stop making mortgage payments since they will be underwater in the near future....

[Quicksilver]

Originally Posted by JGQ

I know it sounds bad. But these idiots who are projecting 25% decline in prices are the same idiots that never saw this mess coming!! All what they are doing is destroying the consumer confidence in the real estate market and delaying any market recovery.

When someone sees a projected 25% decline, why would they buy in that markets? AT the same time, some might think that it is finacially wise to stop making mortgage payments since they will be underwater in the near future....

People can talk themselves into just about anything.

[MrLabGuy]

Historically buying a home was a good "Long Term" investment. These past few years when real-estate became a Fad and started turning houses as a short term investment is when people and banks started getting in trouble.

There is even a show called "Flip this House" which played on the trend. I can't imagine anyone flipping houses in this market unless you buy up foreclosures but even then you'd have a hard time in this saturated market. Not only are there a lot of houses but you have less people who can qualify for a home loan.

[E61Silver]

I think that in CA you can hand the keys back to the lender and not be personally liable?

[Eric5273]

Originally Posted by MrLabGuy

Historically buying a home was a good "Long Term" investment.

It was a good long term investment because you could live in it and thus, avoid paying rent to someone else. But as a seperate investment to make a buck, I don't know that it's any better than any other kinds of investments. Of course it was good if you purchased in 1998 and sold in 2004. But then there have been down periods, such as between 1985 and 1995 -- that period saw no increases in prices for an entire 10 year period.

[Krimson X]

My parents sold their "cookie cutter" 4 br. 2.5 bath track home in San Jose during Spring of 2006 for $800k. They bought it in 1984 for $117k. The home was bought by a realtor as her primary residence. Now, the house is vacant and has been on the market for over a year.

Since then they have moved to Murrieta, Ca (Riverside County for reference), and were able to buy a much larger, less expensive home, and made a hefty down payment and still had a few hundred grand to invest in other instruments.

Lake Elsinore, Ca, which is minutes from where my folks moved to, was featured in the Jennifer Aniston edition of GQ as one of the country's hardest hit area due to foreclosures.
http://men.style.com/gq/features/ful...7779&pageNum=3

It's all about timing.

[B-Line]

Here's the thing, I think that report if skewed... Let me explain.

The price drop they are reporting:
1) Has already taken place. What I mean is, sellers have already dropped their asking prices 20%-25%. But since there are many sellers and few buyers, there haven't been enough transactions to post the changes.

For example.
A $500,000 home two years ago is now for sale for $400,000. That means the price has already dropped 20%. But only in terms of ASKING price. Cause the selling prices haven't recorded yet as the homes are still unsold.

So the 20%-25% drop has already happened and as transactions post in 2009 the national surveys will show it.

In otherwords, we have already SEEN the drop in asking prices they speak of. Now as 2009 nears, those sale prices will be recorded and the premonition will become reality.

That does not necessarily mean that the asking prices are going to drop an additional 25%. Just that the recorded selling prices will reflect that dropped asking prices.

ALSO. Since California and the areas mentioned in the article are some of the last areas of the country where prices have held, it's only reasonable to assume they were going to correct eventually.

So if the rest of the country has dropped some 50% and the areas in California drop 25%, isn't it fair to say that California real estate has largely beaten the market? Or at least been on par with the rest of the country? It just happened later here than it did in say Vegas.

[Eric5273]

Originally Posted by B-Line

Here's the thing, I think that report if skewed... Let me explain.

The price drop they are reporting:
1) Has already taken place. What I mean is, sellers have already dropped their asking prices 20%-25%. But since there are many sellers and few buyers, there haven't been enough transactions to post the changes.

For example.
A $500,000 home two years ago is now for sale for $400,000. That means the price has already dropped 20%. But only in terms of ASKING price. Cause the selling prices haven't recorded yet as the homes are still unsold.

So the 20%-25% drop has already happened and as transactions post in 2009 the national surveys will show it.

In otherwords, we have already SEEN the drop in asking prices they speak of. Now as 2009 nears, those sale prices will be recorded and the premonition will become reality.

That does not necessarily mean that the asking prices are going to drop an additional 25%. Just that the recorded selling prices will reflect that dropped asking prices.

ALSO. Since California and the areas mentioned in the article are some of the last areas of the country where prices have held, it's only reasonable to assume they were going to correct eventually.

So if the rest of the country has dropped some 50% and the areas in California drop 25%, isn't it fair to say that California real estate has largely beaten the market? Or at least been on par with the rest of the country? It just happened later here than it did in say Vegas.

Logic would say if there are so many homes for sale that are not being sold, that would lead to further price drops until the demand meets the supply.

[B-Line]

Yes Eric,

We have all heard of the principles of supply and demand. But what your logic fails to consider is:

1) Purchase Price
2) Borrowing potential
3) Carrying costs
4) Home or speculative real estate.

Remember the price of a home is generally based on two things:
1) Value of the DWELLING
2) Value of the LAND..

The price of the dwelling is usually a fixed cost. It cost X to purchase the wood, the drywall, the labor, the plumbing, etc. Where there is a lot of floating room is the value of the land or property. Cause for the most part, the dwelling costs don't change, it's the land they are on that changes.

I don't forsee home prices selling for less than what they were cost to build. So assuming the land values go down to nothing, the dwelling will always have at least a bottom.

And builders and real estate owners know, unless there is a panic, hold onto those units, rent them out. Everyone still needs a place to live.

ANd that's what a lot of the loft, condo places are doing now. They were going to sell but are probably going to become rental places instead.