In fact A TON OF IT has hit the fan...the market is so mired in turmoil that it's hard to make predictions. The unsophisticated flippers are gone, the stated income/no money down buyers are gone (actually they were tossed off the bus by the lenders who started saying no to them) and the move up market is being hammered as folks have FAR less equity than they had 4 years ago. These are interesting times to say the least. Foreclosures are a massive influence as are short sales. In one neighborhood in Oceanside 13 of 18 homes for sale are either foreclosures or short sales, and in one area I checked along the I-15 at the 56 there are 10 homes for sale and 8 are short sales...if you think we have hit bottom you're wrong.
The sellers market ended, we sailed through the "Negotiated Market", we stopped briefly in a buyers' market...and now we are in a lenders market Buyers are being cautious as they react to the reality of a bubble which has DEFINITELY burst. Sellers are realizing that they will have to price competitively to move their property. Inventories have ballooned and then deflated. Appraisals are a giant question mark in every deal regardless of the price point. In some cases I have seen low appraisals cause price reductions on sale transactions, and every deal I am in on is getting serious review of the valuations...that means review appraisals for every deal. Wow!
So who's buying? The buyers are out in droves in the sub-$300k market but the lenders have gotten more conservative. The FHA loan is the new standard as the conventional lenders have made such a pain in the neck of themselves as to put themselves out of business. Even very well qualified buyers (high credit scores and plenty of money) are being looked at with a microscope...and being turned down. If you are a seller now you need to price it right or be left behind...there WILL be a bank owned property for sale in EVERY neighborhood soon if there aren't three already.
In the resale market above $300,000 we are seeing price reductions and reductions after just a few weeks as the sellers adjust their plans to get their homes sold. Seller concessions on sale terms and extended market times back to historical averages are the norm. Buyers are making demands for repairs and getting them. Listings are expiring, sellers are offering commission bonuses and incentives...in short we are back to a more traditional model where the deal points are negotiated to everyone's satisfaction. Of course there are exceptions to this new market...certain neighborhoods simply are in high demand and still sell fairly rapidly when the homes are correctly priced. Beach homes are an example...Cardiff or La Jolla have always enjoyed special demand and that's still true. There are certain places that people save their money to move to. Homes with trophy elements like golf course frontage, GENUINE ocean views and such hold appeal for everyone and any home where you can walk to the beach is still a red hot commodity. Just about everything else though is lingering on the market until it gets priced where the buyers AND THEIR APPRAISERS are comfortable. The speculators/flippers have gone home, and are selling their properties, if they don't simply walk away, most often at a loss! Of course there are certain sellers and their agents who refuse to accept the new reality and price their homes properly to sell in the current market and they are certainly making a bad business decision...overpriced properties are the speedbumps of our industry...they make the correctly priced properties that much easier to sell. Sellers are well advised to take a lesson from the Homebuilders and get ready to grant the concessions BEFORE the guy down the street does.
The continuing implosion in the sub-prime mortgage market will have deep and lingering effect on the housing market as many buyers who used the insane Zero-Down financing products will continue to get THEIR TEETH KICKED IN for the next 2-3 years. The fallout from the defaults will spank ALL price ranges as the owners have little choice but to go to foreclosure, ask for a short sale or just sell at a loss. The developing story, hot on the heels of the sub-prime mess, is the distress in the Alt-A mortgage market...that's the market for folks with good credit and good jobs and income but who needed to get their loans with no questions asked...Liars Loans we called them...they will be defaulting AND WALKING AWAY FROM HOMES at rates that may exceed the sub-prime numbers and so will also negatively affect the market for homes priced above $500,000. The common foreclosure product is also a factor as job losses mount...there are always a certain number of loans that go bad no matter what.
Investment properties or apartments? That's another topic...see the "Investors" link on the left for a discussion on that one, but remember this...a $50,000 gross scheduled income on an $850,000 property is a sucker bet unless you have a HUGE pile of 1031 money as the equity and even then it might be better to pay the taxes and count your loot. Investors and speculators were the first to bleed when the market turned. Remember, investors...Pigs Get Slaughtered.
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