Bottom in the California Real Estate Market?
To say that the real estate market in many parts of California has taken a beating would be an extreme understatement.
The market has been completely taken apart in the past few years, with a speculation downwards acceleration over the past 12 months. The main culprit? Foreclosures. People not being able to afford the mortgages that they signed on to. People choosing to simply walk away from their houses because they are so far underwater on their investments. Home "flippers" who bought their fixer-uppers just before the real estate market tanked, and now see no way of ever making money on their investments. These types of people are all reasons why the number of foreclosures have spiked in California over the past 12-18 months.
There just might be some hope though. Might the California real estate market be nearing a bottom?
I was reading an article recently posted on Bloomberg (link below) that made a strong case that the bottom might be here.
First off, home sales have risen three straight months across the entire state of California, following THIRTY straight months of declines. The dramatic fall in real estate values seems to be attracting value investors. Demand has been non-existent over the past 2-3 years, and increasing sales is a very good sign for the overall real estate market in the state.
Another important statistic that relates to increased sales - less inventory of houses on the market. According to the article, it would take 7.7 months to "deplete the supply of homes" currently on the market. This is compared to 10.2 months this time last year. High inventories mean that sellers will be battling to lower prices in order to sell their homes. A decreased inventory means that there will be more demand for the homes that are on the market, which will lead to higher prices and a stronger real estate market.
The article also says that some of the hardest hit counties in the state have seen the total number of homes on the market shrink considerably. Foreclosed homes are now getting "multiple" bids, and total inventory has decreased dramatically.
Are we close to a bottom in California?
Will California lead the rest of the country out of the worst housing recession since the Great Depression?
Or do we have further to go?
My gut feeling says that this will ultimately (over time) prove to be a great entry point into many regions of the Californian real estate market. There will be no sudden rebound - there are way too many foreclosed properties that still need to work their way through the system. But overall, I think that this is a good time to buy if you have an eye towards the long-term.
Source: California's Discount Foreclosure Sales Point to Housing Bottom
Filed under: Real Estate News | The Economic Meltdown | General Knowledge