Some insight as to how the drop in home values roll out, and why.................
The more I process short sales for sellers, and also assist buyers with new home purchases, the more data I accumulate.
EVERY DAY I am running comps these days for buyers and also running Comparative Market Analysis (CMA's) for sellers.
What I've discovered is that the gain, and drop, for that matter, in home values is kind of like a "bullseye" when you plot it out.
The center of the bullseye is usually a major metropolitan area. This is typically where the highest demand for housing is, and thus by the laws of supply and demand, creates the highest value and prices for homes on average.
Well, for those who can afford to buy in the "bullseye", they usually do so.
For those who cannot afford to buy in the "bullseye", they buy as close to it as possible by how much they can afford. This is somewhere in the pink outercircles if you look at my diagram.
For those who cannot afford to buy in those areas, they typically will look in the outer, white areas.
But it is interesting to see how this affects those areas if there is a decline in the market as we have seen over the past 5 years.
Those outer areas in the white zones get hit hardest because the demand sort of "implodes"
Let's use my area of the San Fernando Valley as an example.
In our area, in addition to Hollywood we have the entertainment industry comprised of television studios, film studios, and radio stations in such cities as Burbank and Studio City and a few others. And of course we have the downtown Los Angeles area about 20 minutes away.
Well, in 2004/2005, at the peak of the market, $100,000 wouldn't really by you anything in the "bullseye" area. You never really saw anything at all with a "1" in front of it. It simply didn't exist.
So in order to purchase a home in that range, you had to go out to the furthest "white" areas. Areas such as these are about 1 1/2 to 2 hours away from the metropolitan LA and San Fernando Valley areas.
Well, now in 2011, on the average between homes and condominiums, properties with a "1" in front of it you can find in about 15% of the overall market!! That's a dramatic increase in availability of homes in that price range.
And that follows suit for buyers in other ranges. Those buyers in all the different ranges can now afford to buy MUCH closer to the bullseye area, and are doing so in droves!!
But what that does to the outer "white" areas is devastating because the availability of homes in lower ranges that are closer to the bullseye creates a reverse affect in those "white" areas.
I'm seeing homes that sold for $350,000-$400,00 in some of those areas now being listed for $95,000!!
Home values will increase. They always do.
And people are ALWAYS moving into Southern California every day because of the weather and job market.
I can testify to that first hand! There is plenty of new construction still going on as I speak! It's quite amazing.
And I have buyers coming out of the woodwork now who want to take advantage of the current home prices and interest rates.
Can all of us afford to buy at first in the bullseye? Of course not.
But the important thing to remember is: Know when to take advantage of the market when it presents a window of opportunity for you to move closer to the target.
You can go online as much as you want, but there is no replacement for an experienced agent who knows the region and has been around a while to be able to guide you, at your particular stage of aim, towards that bullseye.
First time buyers: Get in while the gettins' good!
Existing homeowners: If you're in an equity position to do so, take advantage of your opportunity to upgrade.
So the next time you're deciding about where to purchase, especially from an investment standpoint, you may want to stay on "Target" with an outstanding real estate agent who knows the red and white, so you don't have to be blue........