I was very disturbed when I red an article earlier this month that my local market had dropped in value by a full 9% in just one month.
Hello, I live here and work this market full time - every day and yes, I have seen a drop month after month - it has never been 9% in a single month, despite what the local newspaper, "The Press Enterprise" reporter Leslie Berkman reported on August 30th, 2008.
Now, I agree with most of what the article reports - but come on, lets be responsible and not add fuel to the fire. I agree with Ms. Berkman when she said, "Economists and real estate insiders agree that the biggest price drops are behind in Inland Southern California. But they say prices could fall another 15 percent or so, bottoming in mid- to late 2009 or 2010."
When asked, I have often voiced my opinion that the market had another 10% left to bottom in the next 12 months which will probably be followed by still another 5% decrease in the following 12 months before we actually bottom out and start an incline for a couple of additional years before the California public gets tired of waiting and starts a new buying frenzy fueled by the principals of Supply and Demand. My guess is the population of California will be significantly higher in 4 or 5 years than it is today.
I do not believe it is in anyone's best interest to wait on the market. First off, we won't actually know we hit the very bottom for at least 3 months after it happens as real estate value is all about trends and trends take time to reveal themselves.
If I was in the market to purchase real estate I would be more concerned with rising interest rates than I would dropping prices. The way I see it, anyone who buys a home now and plans on living in it for at least 5 years cannot get burned - impossible. The reason being is many newer homes are selling for $60 to $65 a square foot today - about half the cost of building a new home. Hello - can anyone say bargain???
If the interest rates climb to 9% or 10% like they did in the 1990's...or how about 18% to 21% like they did in the 1980's, then the price will be an point if insignificance. For example a 30 year fixed loan at 6% will have a $599.95 monthly principal and interest (P&I) loan payment. Increase that by just 1% and the monthly payment is increased by over $65 a month. So a $250,000 mortgage today at 6% would have P&I payment of $1498.88. At 10% that payment would jump to $2,193.93; at 18% that same home would now require a $3,767.71 monthly mortgage payment.
PERSONAL EXPERIENCE
And yes, 18% really did happen in my lifetime. When I was in the Army, returning from a 6 year tour in Europe, we had a democrat president in 1980. I had a down payment on a home for around $50,000 at the time but ended up losing my deposit (which I could not afford) when the rates jumped to 21%. This was in the days before Rate Locks became common.
So, my point is that interest rates are much more significant to the buyer than the actual purchase price - especially since prices are so low right now.
To buy a home today makes pretty good sense to a lot of people. The California Association of REALTORS® reported that 177% more Californians bought a home in July 2008 over July 2007. In Hemet, 74 homes closed escrow in August 2007 and then this year in August, 208 escrows closed, reflecting a 284% increase in the number of transactions for over $100,000 less than the homes were just a year earlier. In August 2007 the Median price of a home that sold in Hemet, California was down to $267,000. In August of 2007, the Median price of a home in Hemet, CA was only $159,900 - approximately a 41% drop in a single year.
Here is some data that I collected using the Alliance MLS - which is a compilation of the local SoCalMLS that is used by the local Hemet - San Jacinto Association of REALTORS (HSJAOR) and the Matrix MLS used by most other REALTOR boards in South West Riverside County and throughout the Inland Empire region of Southern California.
The downside to this compilation is that there are duplicate entries as some REALTORS will list the same home in both MLS's so that they can gain maximum exposure It is also very difficult to search and sort by all but the very basic search criteria.
SOLD HOMES BY PERIOD
|
PERIOD
|
SOLD
|
MEDIAN $
|
Sold $ From
|
Sold $ To
|
|
Sep-08*
|
121
|
$145,000
|
$49,900
|
$99,725
|
|
Sep-07*
|
56
|
$263,990
|
$99,725
|
$777,000
|
|
|
|
|
|
|
|
Aug-08
|
208
|
$159,900
|
$30,000
|
$450,000
|
|
Aug-07
|
74
|
$268,000
|
$81,000
|
$565,000
|
|
|
|
|
|
|
|
Jul-08
|
172
|
$165,500
|
$41,500
|
$624,000
|
|
Jul-07
|
118
|
$281,000
|
$128,000
|
$739,000
|
|
|
|
|
|
|
|
Jun-08
|
177
|
$179,500
|
$49,900
|
$560,000
|
|
Jun-07
|
93
|
$287,500
|
$125,000
|
$720,000
|
This chart shows how many homes actually closed escrow each month, the Median Price for each months well as the range of sales prices for closed transactions in Hemet, CA.
LISTINGS BY PERIOD
|
PERIOD
|
NEW
|
MEDIAN $
|
List $ From
|
LIST $ TO
|
Cur ACT
|
Cur SOLD
|
Cur PEND
|
|
Sep-08*
|
253
|
|
$45,000
|
$1,100,000
|
223
|
2
|
19
|
|
Sep-07*
|
287
|
$267,500
|
$41,500
|
$1,149,000
|
12
|
69
|
1
|
|
|
|
|
|
|
|
|
|
|
Aug-08
|
389
|
$193,000
|
$37,000
|
$750,000
|
258
|
12
|
91
|
|
Aug-07
|
416
|
$297,000
|
$800
|
$749,000
|
10
|
87
|
2
|
|
|
|
|
|
|
|
|
|
|
Jul-08
|
423
|
$224,900
|
$49,900
|
$895,000
|
205
|
76
|
92
|
|
Jul-07
|
443
|
$299,900
|
$68,250
|
$969,000
|
7
|
95
|
0
|
|
|
|
|
|
|
|
|
|
|
Jun-08
|
388
|
$199,900
|
$65,000
|
$419,000
|
169
|
99
|
65
|
|
Jun-07
|
451
|
$225,000
|
$2,000
|
$1,870,000
|
5
|
87
|
1
|
* September 1-21 Only - Data gathered 9/21/2008.
This chart is similar, covering the identical periods but instead of looking at the activity of closed files this chart examines how many properties were listed each month and again looking at the total number of new listings, the Median Price and the List Price homes came on the market with
The difference is this chart looks to see what has happened with the properties by examining how many are still Active, how many Closed escrow and how many (if any) are currently in the Pending status. I find it amazing that there are as many active listings still on the books from over a year ago. My guess is that right offer could get a ‘smokin' deal on one of these properties, as the seller wants out.
Collectively these charts point out the trend of a year ago as we were early in the rapidly declining market and how it continue today. These charts show that there are some great opportunities in the current real estate market and with interest rates still in the realm of historically low, makes this an excellent time for the investor, first time or move up home buyer to make their move and secure their financial futures with real estate today.
Blessings to all who read,
John Occhi, REALTOR®
Century 21 Crest - CrestREO
Over $1 Billion in Closed REO Sales
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473
Servicing THE REO Needs of Asset Managers, Servicers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above phone number.
GO HEMET!
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Just last week I posted that the 
