California's Real Estate Market Snapshot for September 2007 shows a
dramatic drop in the average home sale prices. Dont let this one fool you
though as the higher end of the market has seen a substantial drop in activity mainly due to turmoil withing the lending industry which has greatly effected the "Jumbo" loan market.  

Unsold inventory is on the rise as expected yet only up 5.9% over last year. This report does not include new home inventory or sale data. One surprise is the median days on market compared to the median days on market. With sales down by 22% and iventory up a staggering 46.6%, one would expect the average days on market to be increasing.

What does all of this mean to to the average consumer or investor? Not a whole lot that you can hang your hat on unfortunately. New home builders continue to build and their increased inventories will continue to cause concern and further supress some of the market. This could be a great time for investors to seek out failing builders and purchase unsold inventory. I would not recommend this approach to the average home buyer. 

The next few months will provide us a more solid view of things to come. With the stock market reaching all time highs, it would suggest that what the real estate market is experiencing is much less of a 'Bubble" than a result of lenders being exposed due to the lack of rapid appreciation. Do we all think that with lenders offering 100% financing, negative amortization and loans with little to no qualifying documentation that these practices would not come back to haunt them? Some of these loan products would require 12-20% annual appreciation in order to go unnoticed. Lenders have been caught, the market has been effected and it will take some time to figure out how this will be handled.

The bottom line.....We still have demand for housing, California has the fifth largest economy IN THE WORLD, and regardeless of East Coast opinion, the state is not set to fall into the ocean due to a major earthquake. California IS and will always be an expensive place to live. Housing affordability issues will, in all likelyhood, never be solved.

A recipe for disaster? I dont think so.

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