Home Prices Hitting Bottom?

The question usually seems to originate from  personal interest rather than unaffected curiosity. Home values have been on a steady decline for the past four years in most of our country’s densely populated areas. Why do we seem to care so much? I’ve come to notice, home owners that have little to no mortgage debt and aren’t interested in relocating any time soon typically seem have little to no concern regarding the value of their residence. The concern seems to stem more from the moderately leveraged to heavily leveraged consumers.

I also have found that over the past four years that most people asking the question above weren’t seeking the answer if the answer wasn’t “Yes.” With so many sources, like our politicians and media, stating that we were near the bottom, I don’t find it very surprising that most people dismissed the fewer reports that forewarned further decline. It was really optimism out of desperation rather than inspiration. The problem is that our media, our politicians, real estate related organizations, and lending institutions have nothing to gain by portending accurate direction. They will cater to whatever serves them best. The cure is simple. Instead of accepting information from sources that have so much to gain, challenge yourself to learn what drives your market, at least on your local level. How does the job market seem to be doing? What percentage of home owners are currently in default of their mortgages (I wouldn’t recommend using only REO listings as many banks have been withholding some of their REO)? How likely is is that a first time home buyer will be able find a monthly mortgage payment for around the same cost as what they are paying for rent? Are more people moving into the area than leaving? Is there an increase to commercial construction? Do your homework and you will find your answer.

So, have home prices seen the bottom? I can say that in many parts of California, yes. This is regardless of the fact that the federal home Buyer tax credit is going away in April, that mortgage interest rates could increase significantly, it has become more difficult to qualify for many mortgage programs, unemployment at very high rates, and that the trend has been so negative for so long. The reasons why are that the affordability index is at a record high, most areas are are still seeing population growth, and a great percentage of the available inventory is owned or financed by very motivated financial institutions. Also, savvy real estate investors are out in full force. They read this data accurately months ago.

So, can a home’s value still decline in California? Definitely, but while keeping that in mind, also remember that trying to time such an important purchase to squeeze every penny in equity could also cause one to completely miss an opportunity.

Jason Shapiro


Quality Funding




My two cents with interest…

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