My Thoughts on the Direction of California's Housing Market

Well the Olympics are over, the kids are back in school, the Yankees are out of the pennant race, the lending markets are barely functioning, and mortgage lenders are still failing.  Oh bye the way, the Commerce Department has determined a recession will begin by Christmas. 

This summer, the Feds were obsessed with minimizing inflationary fears as the cost of a barrel of oil soared, damping the economy as the Cost of Goods increased.  Maybe the government should get serious about Energy.  If we had spent a $1 Trillion to support development of alternative and renewable energy industries versus trying in insure cheap oil in the Middle East, maybe our long range energy out look as well as our economy would have a bright future by now.

Housing prices nationwide continued to move lower this summer in most markets as sellers gradually came (or were forced) to accept lower price levels.  Buyers were reaping the benefit of today's housing market.  Transaction activity which was still slow over the summer months seems to be increasing as more buyers entered the market.  Hopefully the housing market activity will rise to "normal" again soon.  Price levels may fall another 3% to 10% in many markets before entering a stabilizing phase for several years.  This phase historically has lead to a new "up" cycle. 

Real Estate seems to follows a predictable 20-year pattern, 10 up years followed by 3 down years and then 7 flat years (adjusted for inflation, i.e. 3%-4% annual gains), and then the cycle repeats. The next 6-12 months will likely represent the end of the 3 down years, and then we will be in store for 5-7 flat years or the beginning of the real estate's stabilizing phase. 

This is actually good news.  The American dream is to own a home, not lose a home.  As prices stabilize, sellers and buyers will have more security knowing the value of the commodity they are selling or buying.  No matter what is happening in the market, rates, housing values, etc, people always need to move for one reason or another.  As we enter a stabilizing phase, there will be less inhibition to sell a home because you know its value and will not over-estimate its value (at least not too much) or buying a home because you know it will not lose value.

So, as we end the summer of 2008, as the economy heads for a possible recession, we hope the housing market has or may be turning the corner. 

You can find AJ Nisen on Active Rain at Contra Costa California Mortgages.  Call AJ to talk about your Mortgage, Mortgage Rates, Free Credit Report or visit AJ's website to use his mortgage calculator.  
 

Alan 'AJ' Nisen
Mortgage Loan Officer
Lafayette Chamber of Commerce Board Member
Orinda Chamber of Commerce Board Member
Alamo Chamber of Commerce VP
AJ's Email
AJ's Mortgage Website 
AJ's ActiveRain Blog