Where is the bottom? A simple test!!

By
Real Estate Agent with Pacific Sotheby's International Realty DRE #01097420

Every potential buyer and seller in Orange County wants to know, where is the bottom price in our current real estate market.  What they really want to know is where is the bottom for their home or if they are looking to buy, where is the bottom for the neighborhood they are looking to move to. 

Well here is a simple test.  For this test you may need a mortgage calculator.  If you don't have one call me and I can help you out.  The test is simple;  estimate the average household income of the neighborhood you live in or if a buyer the neighborhood you are considering.  Then simply figure out the mortgage which that average income would qualify for using the current interest rates, currently about 6% for conforming loans and about 7% for loans above $714,000. 

This is a ballpark test, but a good test because buyers now have to qualify for mortgages, strange as that may seem (a little sarcasm).  The recent run up from (2001 to 2006) in real estate prices in Orange County as well as most of the nation has been fueled by easy lending standards among other things.  Now the lenders have tighten up lending standards, so there are no more (or very limited) stated income loans, therefore real estate prices will adjust back to real income levels.   It is the old story of real estate prices being based on simple fundamentals.

Now understand this is a very simplistic test, for a better idea of what your home is worth today as well as where the possible bottom of the Orange County real estate market might be, give us a call at 949-355-3000. 

 

Comments (2)

Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

I found an easier method... you wait until a year after and then look at the chart that shows where the bottom was. Your method gives much quicker results.

Of course, I'm being silly- but it's funny to me how much credence historical information is given, especially when one considers that the current market is always a moving target with different variables than previous cycles. 

Apr 14, 2008 10:53 AM
Tina Maraj
RE/MAX One - Fullerton, CA
Celebrating 30 Years of Real Estate Sales
Interesting concept, and very realistic way to look at home values/prices.
Apr 19, 2008 03:11 AM