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California real estate market bust?

By TIM MONCRIEF

Real Estate Agent with Tim Monciref 0374754

December 11, 2006 02:14 PM

Is the California market ready for a major correction? Yes, based on the market data that I am tracking. If the trend continues, 2007 will be the year that California and Arizona moves from a slow down in the real estate economy to a panic sell period that may last at least through mid 2008. If this does occur as anticipated, Austin's real estate economy will thrive as the movement is very strong from those relocating or vacating the bubble cities. This is a sad time for the bubble cities and an exciting time for the real estate economy of Austin, Texas.

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Renée Donohue~Home Photography

Savvy Home Pix - Allegan, MI

Western Michigan Real Estate Photographer

Panic does not equal motivation to sell. Panic sellers will not give up much, if anything at all. They just want to cash out if they can. The panic sellers that do sell do not necessarily move out of the city they are in. They could just rent and wait for the fictional bubble to burst.

Texas is a wolf in sheep's clothing with their property taxes vs house prices. Many AZ & NV residents are pretty astute to that fact. Affordability is almost equivalent.

Has anyone in Texas waiting for their turn considered what would happen to current homeowners/property taxes/foreclosures if they got their wish of California/Arizona/Nevada/Florida appreciation? It would devastate their economy.

Dec 11, 2006 02:44 PM

Brian Brady

Matthews Capital Markets - Tampa, FL

858-699-4590

You are correct about the affordability factor hurting CA and AZ. I lend in both those markets and the blood is just starting to seep. However, it's not being reflected in further price declines (the market discounted this bloodbath these past 18 months).

Renee brings up a great point about your property tax problem there. It's EXTREMELY unfair to an out-of-state investor. The wage declines in Texas combined with the property tax hikes (your 10% cap is far too high) makes it difficult for an investor to plan for long-term coverage of his/her debt service.

Now...selling the West Coast and moving to Austin? That's a different story. That makes sense for people.

Dec 11, 2006 04:43 PM

Renée Donohue~Home Photography

Savvy Home Pix - Allegan, MI

Western Michigan Real Estate Photographer

I had a friend who had sold her house here and couldn't wait to retire (mid 30s) to Texas. The problem with Texas is that they bought their house "free and clear" (comparable price to the home loan they had here) and they ended up paying the same monthly payment when taxes & insurance are figured in as they were here with a loan + taxes + insurance.

"Retirement" soon became a nightmare.

Dec 11, 2006 11:34 PM

TIM MONCRIEF

Tim Monciref - Austin, TX

Over 2,000 homes sold…..

It is true that taxes are a concern to those who want to retire or invest; but, if you break down the numbers like you would anywhere else, it is still an incredible investor market. This market has been flooded by investors since 2003 when our market hit rock bottom. With simple economics, the higher property taxes relative to many other states is offset by the lower pricing versus other states. Austin is below the national average median home value, yet it is a highly desired market, especially those moving or investing from California, Arizona, Nevada, and oddly Florida.

I and my co-owners of our group all moved from California (before the dramatic price increases, unfortunately) and we all fully understand the comparisons of the market. It takes people about a year to understand and justify that they gave up a massive state income tax and car tag expense as well as abnormally high gas, construction costs, labor, and housing costs, etc...

If an investor can make a home in California pencil out that is over 3 times our median price, the taxes can easily be justified. The last investment purchase our group made was on a condo with 10% down! We are upside down a bit over $100, but it was 10% down! 20% down and we would easily have a cash flow, but with a tax deductable $100 negative, it did not make much since. Thus, the reality is that the market has offset the property taxes.

Dec 12, 2006 08:13 AM

TIM MONCRIEF

Tim Monciref - Austin, TX

Over 2,000 homes sold…..

Panic selling

We will just wait and see what happens next year in California. I visit there 3 times a year and I still hear denial from the real estate community. I went through this same denial when I went through the crash of 1990. If you could hear the comments from the clientelle that we are getting from California, Arizona and South Florida, you would easily understand that a panic is on the horizon.....

Dec 12, 2006 08:47 AM

Richard Goates

Apex California Realty - Redding, CA

Broker 01251781

Hello all real estate is local.It's not fare to say that all California this or all California that. Real estate in one area of my city may be down 5-8% and in another part of the city it is up 5%. Each home is unique and there are actually a few homes out there that have sold for OVER the list price recently! I know because I represented the sellers...we had two offers at once and they both wanted this particular home as it was the ONLY home with 4 bedrooms and a nice pool in the immediate area.

Regards,

Rick

May 03, 2007 11:35 AM

TIM MONCRIEF

Tim Monciref - Austin, TX

Over 2,000 homes sold…..

It's kind of interesting to look back at old blogs.........

Apr 16, 2009 10:07 AM