By Melissa Wirkus
California has been one of the markets most severely affected by the
downturn of the housing
market. This is all because this was one of the states that appreciated
the most and the fastest during the housing boom.
Now all of that success is starting to take a toll throughout most of
the housing regions
of the Golden State.
New reports are coming in that say that California is not going to recover
as quickly as expected and things will probably get worse before they
get better.
The things that are most apparent in California’s market are the
fact that prices are declining and homes are not selling as quickly
as they did before.
An October 23, 2006 article from Realty Times, “New California
Forecast: 2 percent home decline,” discusses how things are not
looking as good as originally hoped for California.
“The latest forecast for the California
housing market's reversal of fortunes jibes with a previous outlook
predicting flat, rather than falling home prices in California for the
next few years. In 2007, California home prices will slip only 2 percent,
while sales will be off 7 percent, according to the California Association
of Realtors’ ‘2007 California Housing Market Forecast.’”
“‘The housing market clearly downshifted in 2006 from the
record-setting sales and robust price gains of the last few years,’
said CAR president Vince Malta.”
Experts say the reason for all of the problems within the housing market
in 2006 were because there was a severe disparity between the buyer
and the seller.
Sellers were unwilling to price their homes according to current
market standards (which meant lowering prices), and buyers were
waiting on the sidelines for prices to drop further.
This resulted in a gridlock between the buyer and the seller that only
made things worse for the already struggling market.
Although the numbers are showing further declines for California’s
market, things may really not be that bad, and there is a saying going
around that the market is just “correcting itself.”
“‘We do not predict a recession, nor do we predict a substantial
decline in average nominal home prices. This forecast is based on two
arguments. There is not enough vulnerability in the usual sources of
employment loss to create a recession, and the historical record suggests
that average home prices do not usually fall without this kind of job
loss,’ said economist Ryan Ratacliff, author of the Anderson Forecast
‘Soft Landing with Turbulence Ahead.’”
“Anderson forecasters said California's housing market could fare
worse should higher interest rates break household budgets, many of
which remain intact with high-leverage, risky mortgages.”
Not surprising, the regions of California
that experienced the most growth during the boom are the ones that are
supposed to fare the worst during the downturn. Those regions are San
Bernardino/Riverside regions, Central Valley and of course, our very
own San Diego.