HOUSING TRENDS IN NEVADA COUNTY MARKET

HAVE WE HIT BOTTOM????  Asks California Association of Realtors

Every home buyer and home seller has the same question:  Has California real estate markets hit bottom?? If you are looking at the number of annual home sales the answer is “yes” and the answer is “not yet” if you are looking at median home prices, according to the California Association of REALTORS 2009 economic forecast.

California has recovered from two significant downturns since 1970.  Between 1978 and 1982, double-digit interest rates put mortgages out of reach for most home buyers creating a 61% plunge is sales prices.  The second, between 1988-1994, was fueled by a national recession in 1990-91 with subsequent job losses in defense, aerospace, and financial sectors.

Current market conditions began to surface in the last part of 2006, beginning of 2007 with the meltdown of the so called sub-prime mortgage market. This was followed later in 2007 by the credit crunch, which grew into a full scale financial freeze by fall of 2008.  Each of these damaged the housing market, with the last two undoubtedly weakening the economy as a whole. Only in recent months — three years into the current housing downturn — has the market faced the new challenge in the form of an economic recession.  A recession will very likely delay a turnaround in the housing market.  Even so, statewide trends will vary and what counts is the trend in the local market.  A REALTOR will look at present inventory vs. homes sold each month to determine duration of inventory.  Inventory duration of 8 months or longer indicates a longer road to a turnaround.

Ultimately it is all about timing.  Timing matters a lot less if you are buying a home you will be living in for 6-10 years.  Buyers who adopt a long term strategy may find the timing is now to buy when they find a home that meets their needs and is affordable.  That home may not be available six months from now.  With inventory plentiful and interest rates down, buyer indicators are strong and should remain so for some months.

We are near bottom and can see bottom, with more stable prices on the horizon by the second half of 2009 as the statewide median price continues to be influenced by the statewide foreclosure and short sale market.

MARKET NEWS AND VIEWS

Real Estate Boom in 2009? or more doom and gloom?  You are probably thinking…Boom?? who’s kidding whom!! Well we may not be exactly in for a boom, but we could see a dramatic improvement in this real estate market over the next 12 months.  Here’s what’s happening that could make 2009 better than anyone might anticipate.

1. 10 YEAR REAL ESTATE CYCLE
All markets are cyclical and a 10 year cycle is normal. If we look back at the markets of 1960, 1970, 1980, and 1990, we see markets at their lowest points, plagued by excessive inventory, foreclosures and short sales. By 1994, the market had stabilized and by 2005 it hit it’s peak (7 years into the cycle) and began its downward trend. Given the 10 year cycle, we should be approaching bottom and moving toward a more normal market, in spite of the financial meltdowns. California Association of REALTORS reports increased sales of existing homes and a shrinkage of foreclosure inventory. As the inventory of foreslosure and short sale homes disappears, prices will stabilize and we will be turning the corner toward an upward trend.

2. PENT UP DEMAND
Buyers and Sellers have been telling their REALTORS that they are waiting for the Presidential election to be over and an economic stimulus package to be put into place.  The election is now behind us and the bailout is in motion.  People still are living their lives … getting married, having children, retiring, relocating.  Many of them waited to buy or sell real estate, waiting for the market conditions to improve.  Look for this pent up demand to start showing up in the market in 2009.

3. THE CREDIT CRUNCH
Credit is still tight.  We are back to qualifying buyers the way it was done in the 1980’s. However, there are great loans out there; and with the bailout funds as well as new guidelines for FHA, Fannie Mae and Freddie Mac more money will flow into the system.  Many credit unions are flush with cash and making excellent loans to highly qualified buyers. As the credit eases this year, buying and selling will become easier.

4. INVENTORY AND DAYS ON MARKET
The amount of inventory and days on market are the best measure of market changes.  Prices always lag behind these statistics.  Your REALTOR tracks these statistics and as inventory shrinks and days on market shorten, we begin to see prices stabilize and market begiin to shift up.  Look for this to happen in 2009.

5. DEMOGRAPHICS
In 2008, the size of Gen Y (born 1977 to 1994) surpassed the size of the Baby Boom generation.  Gen Y wants to and will own real estate. Gen Y is just now hitting its early 30’s and many are buying their first homes. On the other side, the Baby Boomers are most likely retiring.  They are selling larger homes to downsize into a retirement home, or buying second homes.  As new home building has really slowed down so there are fewer new homes being built, the  demand for existing homes will increase and inventory will shrink.

THE CONCLUSION:

The question is not whether there will be another real estate boom —- there will be.  The issue is how long it will be before it starts.  We, at REALTY EXECUTIVES, watch this local market intently and full time. The statistics that we follow and crunch every day allow us to advise what you real estate future holds ….  call us to consult and plan you real estate moves.

Nevada County is Magical during the Holidays

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