Market Forecast for 2009 by CAR

It's time for the annual California Association of Realtors' market forecast which always consists of many more Powerpoint slides than what is shown here.

For the buyers and sellers of the next year, it's time to think, if not act. The trends already show certain things:
  • Contrary to the decrease in sales for the past two years, this year California single family home sales have jumped up by 12%, and will continue to increase next year, along with an increase in the 30-year-fixed rate mortgage.
  • The overall median house price is projected to decline from 2008's 37% decline to a much smaller decline for 2009 of another 6%.
  • The notices of default issued in Southern California during the second quarter of 2008, over 68,228, exceeded the previous record high of 61,541 notices in the first quarter of 1996.
  • Highest number of the sub-prime adjustable rate loan resets (69% of all California subprime loans) peaked in 2008, declining to 24% in Los Angeles County in 2009 and to 8% in 2010. The decline is similar for the rest of California.
  • The Alt-A adjustable rate loan (58% of all Alt-A loans in California) resets, however, will peak again in 2010, with the highest percentage of those loans being in Southern California and San Francisco.
  • FHA and VA mortgages are now just over 20% of the mortgages, offering favorable rates for first-time buyers.
  • Percentage of first-time buyers is the greatest in the last 7-8 years, getting closer to 40% of all buyers.
  • Los Angeles County had the highest number of sales in August, 2008.
  • In Los Angeles County, bank-owned (REO) properties sold at about 80% of all sales prices, and non-bank-owned sales prices were over 100%--OR, the median price of REO properties were $325,000, compared to non-REO properties at $420,000. Why? Unlike the last down market, the bank-owned properties are often in the "fixer" category, to the extent that laws are recently passed forcing banks to physically maintain their inventory of homes to prevent blight in neighborhoods. For another "take" on the business of making an offer on bank properties, read this Realtor's candid description of her experience.
  • Overall, California 2008 sales are up by 85%, compared to an overall decline in sales in the rest of the country.

For buyers, it's very important at this time to know what to expect when submitting an offer on the bank-owned property, or the seller's short sale property, where the bank is again involved in approving the seller's request to sell for less than is owed on the property. The "credit crunch" and bank bailouts come into play here, the seeming inefficiency of many banks along with organizational mergers, have all impacted how those properties are dealt with. So buyers need to know what kind of seller they are dealing with, the difference between the distressed sale and the "normal" equity seller, who might be in a better position to help a buyer with closing costs.

As more buyers recognize their opportunity, will it mean once again having to compete with other offers? The temptation to wait for a lower price may also ultimately bring more buyer competition into the market.

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