Buyers and sellers are still asking me if the real estate market has bottomed out and if prices are going to rise any time soon. In view of the contradictory reports you read in the national press, this is not surprising. One week we are in recovery mode, the next week we see predictions of a "double-dip".
It really doesn't matter what you read on a national basis. It is really all meaningless because real estate is local. How can you expect to see similar markets in California and Ohio? Even the East Bay and the South Bay have vastly different markets to each other.
The best indicator of the market is to consider like against like. So as I have done many times before, I will review the selling prices of the average 4 bedroom home in the our local areas, over the last 4 quarters. That should be a good indicator of the direction in which prices are headed.
There Are A Few Surprises
Take a look at the chart below. Obviously there is nothing to make you think that dramatic price changes are taking place but it is fairly obvious that prices are certainly not on the increase.
In the 94582 zip code of San Ramon (that is primarily Gale Ranch and Windemere), prices seem relatively stable, while in 94583 their appears to be a slow but steady decline. Danville appears to be following suit, as does Walnut Creek apart from a slight blip, whereas Lamorinda (the communities of Lafayette, Moraga and Lafayette) seems more stable.
Digging A Little Deeper
So what is it that holds prices steady at best or contributes to a continuing decline, albeit at a very slow rate? The answer is related to two factors.
We are still seeing a high proportion of distress related sales throughout the East Bay. People who are having problems making their loan payments, are being forced to attempt a short sale or just accept a foreclosure.
More short sales are being approved now than used to be the case and the banks are getting more efficient at the process but there are still many foreclosures taking place. Bank owned foreclosures can often represent an excellent deal for a buyer but the down side is that today's bargain price becomes tomorrow's comparative sale that an appraiser has to consider when valuing a home for new purchaser in the area. The consequence is that appraisals are often considerably lower than was anticipated by both the buyer and seller in a transaction and then the transaction either gets cancelled or (more often) gets the sale price re-negotiated downwards. All of this conspires to hold down prices.
When Will Prices Start To Increase Again?
I don't ever expect to see the kind of increases we experienced in 2004 and 2005 but we will see homes appreciating in value in the foreseeable future. The determining factor is when the short sales and the foreclosures start to peter out and that will probably not be for a couple more years.
This does not mean that you should not buy or sell. These are great times for first time buyers and the low interest rates are good for all, but inevitably, they will soon start to increase.
If you are thinking about selling but you don't know if it makes sense for you, give me a call and I'll arrange to meet with you and evaluate your situation. My contact details are on the cover. There is never any obligation and I am always happy to hear from you.
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