I would like to say that everything will get better soon, but have to advise caution. What concerns me most is the number of mortgages in default and the high rate of unemployment.
Right now more than 10% of all mortgage loans are delinquent, meaning more than 30 days late. In addition to that, 4.5% are already in some stage of foreclosure. This indicates a strong stream of foreclosures for at least 2 - 3 years. These 9 - 13 million foreclosed homes will sold on the open market over the next 3-5 years and will tend to depress prices. (National numbers)
Nationally we have lost 8,400,000 jobs since 2008. Even if the recession is technically over the recovery will take years. Todays Job Report showed 200,000 new jobs in April. That is great news, but if you do the math it will take 42 months with a very optimistic 200,000 new jobs a month every month, to get back to 2008 levels of employment.
But... this doesn't automatically mean prices will continue to go down. Prices have been pretty stable in this area for the last year or so in spite of record foreclosures and very high unemployment. It is an election year, we will see more government programs trying to deal with our problems. There is at least some recovery in jobs. My prediction is the market will hobble along about where it is now for a couple years.
Right now, the $500,000 and under market looks strong. Houses in this range sell quickly for the most part. You could even argue that prices have increased slightly at the very bottom from a year ago. Prices over a million are very soft. Supply is much greater than demand. Look for these prices to continue to slide for at least the next 6 months maybe year. My theory is that sellers in this price range may have been waiting for 1 to 2 years for conditions to improve before selling, but sooner or later they have to sell. We are also seeing more foreclosures and short sales creeping into the high dollar ranges.
I think San Lorenzo Valley, Watsonville and Salinas are good buys right now just because prices there dropped 60% and more. I think you will have a little appreciation bounce. I see both conservative investors paying cash and holding the property for rental cash flow and first time buyers that can afford to own for the first time in decades.
I would be careful buying in Santa Cruz with appreciation in mind, especially in the over $600K range. Remember also that property flaws get magnified in this intensely competitive market. If the view is not pleasant, if there is road noise, if the house doesn't have curb appeal, if there is work that needs to be done it makes it really hard to sell. Buyers expect big discounts.
Everybody has an opinion, this is just my two cents worth. Real Estate is still a great investment in the long term. Wherever there is a downturn there will eventually be an upturn. Just be mindful that cash flow is critical. That is your bridge to the next upturn.
Right now more than 10% of all mortgage loans are delinquent, meaning more than 30 days late. In addition to that, 4.5% are already in some stage of foreclosure. This indicates a strong stream of foreclosures for at least 2 - 3 years. These 9 - 13 million foreclosed homes will sold on the open market over the next 3-5 years and will tend to depress prices. (National numbers)
Nationally we have lost 8,400,000 jobs since 2008. Even if the recession is technically over the recovery will take years. Todays Job Report showed 200,000 new jobs in April. That is great news, but if you do the math it will take 42 months with a very optimistic 200,000 new jobs a month every month, to get back to 2008 levels of employment.
But... this doesn't automatically mean prices will continue to go down. Prices have been pretty stable in this area for the last year or so in spite of record foreclosures and very high unemployment. It is an election year, we will see more government programs trying to deal with our problems. There is at least some recovery in jobs. My prediction is the market will hobble along about where it is now for a couple years.
Right now, the $500,000 and under market looks strong. Houses in this range sell quickly for the most part. You could even argue that prices have increased slightly at the very bottom from a year ago. Prices over a million are very soft. Supply is much greater than demand. Look for these prices to continue to slide for at least the next 6 months maybe year. My theory is that sellers in this price range may have been waiting for 1 to 2 years for conditions to improve before selling, but sooner or later they have to sell. We are also seeing more foreclosures and short sales creeping into the high dollar ranges.
I think San Lorenzo Valley, Watsonville and Salinas are good buys right now just because prices there dropped 60% and more. I think you will have a little appreciation bounce. I see both conservative investors paying cash and holding the property for rental cash flow and first time buyers that can afford to own for the first time in decades.
I would be careful buying in Santa Cruz with appreciation in mind, especially in the over $600K range. Remember also that property flaws get magnified in this intensely competitive market. If the view is not pleasant, if there is road noise, if the house doesn't have curb appeal, if there is work that needs to be done it makes it really hard to sell. Buyers expect big discounts.
Everybody has an opinion, this is just my two cents worth. Real Estate is still a great investment in the long term. Wherever there is a downturn there will eventually be an upturn. Just be mindful that cash flow is critical. That is your bridge to the next upturn.
