Hi Neighbors,
There is a great article on RISMedia by Chris Pummer that talks about the current housing market in California. For all of the 1990's, home prices in the seven county San Francisco area fluxuated around the $250,000 range. By May of 2007 it sky rocketed to $850,000! The past 21 months saw the median price drop to $399,000 by February 2009. Many areas are at the prices homes sold for 10 years ago before the 'boom'.
Inventory and prices seem to have stabilized over the past few months, with some areas posting up-ticks in selling prices. As I've mentioned before and is reported in this article not only are REO properties going with multiple bids, but Short Sales are also selling quickly and with several offers.
What does this mean to you, as a buyer or seller?
I can't guarantee we are at "" the bottom "", but indications are certainly consistently pointing in that direction. Historically home prices have tracked inflation. Since we are at 2000 prices, we have in effect over-devalued our homes by the amount of inflation over the 2000-2009 time period.
As an example, let's look at the value of a $200,000 home in 2000 and what it's value would be following the historic inflation trends.
| Year | Inflation Rate | Value |
| 200,000 | ||
| 2000 | 3.40% | 206,800 |
| 2001 | 2.80% | 212,590 |
| 2002 | 1.60% | 215,992 |
| 2003 | 2.30% | 220,960 |
| 2004 | 2.70% | 226,926 |
| 2005 | 3.40% | 234,641 |
| 2006 | 3.20% | 242,150 |
| 2007 | 2.80% | 248,930 |
| 2008 | 3.80% | 258,389 |
| 2009 | -0.07% | 258,208 |
What we hear from many analysts is that we are below 2000 prices in many areas around Sacramento and Placer counties. One reason is the bust of the boom of course, but another reason is a larger number of entry level homes vs. those that are upselling to a larger or more expensive home. Regardless, indications are continuing to show stability in the current market and if we will end up following the historic pricing trends we may be in for a quicker rebound than expected (of course take into account the employement situation, the government's involvement in just about all aspects of the economy, etc.). Chris's article enumerates several other overlooked signs indicating that a turnaround is in the process.
Take care and be a good neighbor,
Jeff
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