Many parts of the Bay Area, and in particular, the San Ramon Valley and Lamorinda, historically do much better than much of the country when real estate appreciation is considered.
Unfortunately, because prices increased so much and so quickly, they had further to fall and the resulting impact was devastating for many. Recently, however, the rate of decrease has slowed significantly in our area, and this is despite the negative effect on home values caused by many short sales and bank owned foreclosures that have been dumped on the market.
Evidence of Improvement
The economists tend to look at real estate on a national level and one figure they give a lot of credence to as a meaningful indicator is the “Pending Home Sales Index”. Last month this rose 5.3% nationwide, which is a significant amount. More importantly, it rose in every region of the country.
Now note that this is an index that considers numbers of transactions, not total value of transactions.
You Can’t Expect To Buy At The Bottom
What can be inferred from these numbers is that buyers now believe that home prices are not likely to fall much further, so they have the confidence to write offers and buy homes. Of course there will always be some buyers who are planning to “buy at the bottom” but the only problem with that strategy is that you can only identify “The Bottom” after you have passed it and prices are on the increase.
Possible Improvements In The Market
It will surely soon be apparent to most buyers and sellers that prices are really so close to the bottom that it makes no difference and as buyers become more active, this will encourage more potential sellers to list their homes for sale. The likely effect is that there will continue to be a wide choice of homes to buy for the next few months but as we approach the Holiday season, many of the sellers who have not been successful in agreeing a sale will take their homes off the market. From Thanksgiving onward, it is quite possible that there will be a shortage of homes to buy. The wild card in this reasoning is that we don’t know how many people will be forced to sell their homes or have them foreclosed. These are not discretionary activities and a sudden increase of numbers of homes for sale will certainly keep prices down.
What Will The New Year Bring?
As we enter 2009, I foresee that there will be many buyers who are poised to take action. If the majority of those sellers who took their homes off the market in late 2008 decide to re-list them for sale in January, the balance between buyers and sellers should be at a reasonable equilibrium and we can expect to see stable home prices throughout the year. If, on the other hand, sellers do not take such immediate action, and there are more buyers than homes available (a situation I have seen on numerous occasions at the start of a year), home prices are likely to rise. This is simply the economics of supply and demand.
Note that my thoughts only relate directly to the affluent San Ramon Valley and Lamorinda here. In other areas, not too far distant, there will continue to be a glut of homes on the market for some time to come because the numbers are already so astronomical. In these areas prices will stay low and may even decline further with more foreclosures etc.