The following represents my interpretation of her comments, along with some of the slides of her presentation, she was nice enough to provide.
While we all know that values plummeted during the past two years, a closer look at the data reveals some interesting details which could be overlooked, or mis-understood. For example, when talking about sales, you will notice in the slide below, almost 85% of all sales in January '09 were bwelow $500,000. What isn't obvious here is that the vast majority of these sales were REOs' or bank owned properties.
While we all know that values plummeted during the past two years, a closer look at the data reveals some interesting details which could be overlooked, or mis-understood. For example, when talking about sales, you will notice in the slide below, almost 85% of all sales in January '09 were bwelow $500,000. What isn't obvious here is that the vast majority of these sales were REOs' or bank owned properties.
What is also interesting here is that the luxury market (homes over one million dollars) represented 15% of all California residential sales at the peak of the market. In July '09 these luxury home sales represented only 6% of the market. As you see below, the greatest percentage of unsold inventory is in this same luxury market.
It is Leslie's opinion that going forward, this segment of the market will be one of continued pain for those needing to sell. However, even though this next slide shows some dramatic looking depreciation since the peak, this is really a tale of two markets; one that has taken a hit, but isn't suffering nearly as much as the other market, which has been "ground zero" for the bust, yielding a very high percentage of foreclosures.
The FUTURE : 2010
Going forward, Leslie made the following observations:
In spite of high unemployment, low prices and very low interest rates, California's Affordability Index is at its' highest level in over 10 years, that there is a larger potential buyer pool. When you combine this with almost no new construction activity and a growing number of FHA loans (that permit buyers to put as little as 3 1/2% down) there is growing belief, supported by some early data that the worst of the housing crisis is behind us.
However, there are some "Wild Cards" out there, which could effect this modicum of good news. The first time buyer tax credit, which has motivated many to buy, is scheduled to expire at the end of November. As of this writing there is no assurance it will be renewed.
While sales have recently increased in these "bust markets," most of these sales and price increases are the result of investors coming in at what they believe to be at or close to the bottom, and purchasing extremely inexpensive homes that in many cases permit cash flow from rent - a very rare occurrence in most of California. These same homes have in some cases lost over 70% of their value from the peak.
Yet, as you can see below, the counties shown here have faired relatively well, at least since '08.
Going forward, Leslie made the following observations:
In spite of high unemployment, low prices and very low interest rates, California's Affordability Index is at its' highest level in over 10 years, that there is a larger potential buyer pool. When you combine this with almost no new construction activity and a growing number of FHA loans (that permit buyers to put as little as 3 1/2% down) there is growing belief, supported by some early data that the worst of the housing crisis is behind us.
However, there are some "Wild Cards" out there, which could effect this modicum of good news. The first time buyer tax credit, which has motivated many to buy, is scheduled to expire at the end of November. As of this writing there is no assurance it will be renewed.
And finally, a 2010 projection that indicates a small decline in sales, as bank owned properties decline, and a 3% overall increase in home values, as stability begins to return.
If you are interested in receiving the entire Powerpoint presentation, you can email me at pweingrow@apr.com
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