When will the market correct? Your predictions please.

OK,  Here on the coast of California, we may have hit the price bottom.  we are seeing multiple offer situations on many properties.  I think, however, recovery will be regional.  Do I think we are headed back into the "feeding frenzy" of the last few years, hopefully never.  The only forecast for a market like that is a disaster to correct it.   We have a median price that is over what is was 2 years ago.  $1,195,000.  The median income level is 60K a year.  The only buyers we are seeing are either out of town/country buyers for 2 mil + or entry level buyers (here, that means under 800K)   Volume is still way down (# of sales).  There is still a disparity between income and housing prices here.  It was never a job driven market here anyway...it's more of a resort market (Santa Barbara) .  I wonder what the feds new "bail out" package will do...or if it will even affect our market here (keeping the homeowners out of default, fed loan program).

 It will be interesting to watch, that's for sure!

I predict we won't see a halt to the slide in home values until 2012. By then, most ARMs will have been reset, and we will be through the bulk of (if not all) the foreclosures. It will be another several years before we really begin to see any appreciable increase in home values.

Paul

That's my take and I'm sticking to it. Here's why:

I don't think we're in a "typical downturn" given the "credit crisis" and current rate of foreclosures. This is putting downward pressure on home prices - too many homes on the market, and not enough buyers to buy them. That doesn't mean some areas won't rebound faster than others - I think some will. However, my prediction is based on the overall average for the country, not on a particular region. Yes, some areas are not in that bad a shape in that the downward trend has stopped while some areas are enjoying an increase in values. In areas that are still declining, some areas will see a slowdown in declining values sooner than others, while other areas have been and will continue to be hit hard for a few more years. I think the overall nationwide downward spiral trend will slow greatly by 2010 (which is only 19 - 22 months away), but not stop until 2012. By then, I think we'll be in a normal market for a few years before overall values nationwide begin increasing again.

Many people still have ARMs and Option ARMs that are due for adjustments, and will be so for a few more years, and for most if not all that means an increase in monthly payments. Many of them will be denied the opprtunity to refinance because of credit issues and/or declining values, and with food and energy prices continuing to soar, these people will be faced with a very real dilemma: choosing between paying high food and gas prices or paying for the roof over their heads. Or go deeper into debt to try and stay afloat. I think some of these people are going to go into default, and the foreclosure crisis will continue for another couple of years.

Now, if the government is willing to bail out the banks that got themselves into this mess, then perhaps the government should also bail the people out to help them out of the mess their in. I'm not a big proponent of bailing out the banks - you don't charge higher rates for higher risk, then cry foul when the investments goes south. But because the banks cried foul, and because the government is using our money to bail them out, then perhaps the government should also bail out the people who are in this mess as well. If they do, then I'll revise my predictions. Until then, I'm holding fast.

wow. i read every response to see what others are predicting and find it interesting how certain areas look at the market. I personally think that this will be the year we " bottom out " and that we will not see a boom for a while but by spring of 2010 you will see 100% financing available and guidelines will start becoming more aggressive. Even though the sub-prime companies are a partial cause of this, the profit margins are high enough that they will be back when the market turns.  

Hi Paul, your reference to non-owner occ reminded me of Bellingham...2005 and 2006, upwards of 30% of the SFR purchases were by investors...not sure about their financing structures but we all know that Aurora, et al, were doing stated 100% non-owner financing...So far, B-ham has fared pretty well, but they do have some exposure.  Non-owner occupied financing is where refi's go to die.