I am a Realtor in the San Francisco area. I also have a degree in economics. Our market is probably similar to yours. I can tell you that pending sales are down quite a bit from ealier this year. This is a very good indication that future sales prices are will trend downward in the future.
Part of this down trend is due to the ending of the Homebuyer Tax Credit. And part of it is due to the cyclical nature of home sales. Prices normally go down a little at the beginning of the winter.
You ask how buyers feel about this. Well I am a buyer like you. I sold my home in 2007 because it just didn't make sense to own a primary residence anymore. I am still renting and feel pretty secure in the fact that home price are not going to shoot up anytime soon.
In fact, believe it or not, home values are still in the bubble in some areas. In some of the higher end areas homes are still selling at 2005 values.
But in the lower end areas there can be some good deals. I suggest to my clients that in this market you have the time to find a home that you love. So don't jump into anything.
2011 could not only bring lower prices but much better selection for many areas.
Things to remember:
1) We are still in the final stages of the biggest housing bubble in history. Home price values in the aggregate are still above the peak bubble price reached in the 1990 housing bubble according to the Case-Shiller index.
2) We are in the most unsound economy of our country's history as our government is desperately spending trillions of dollars in an attempt to control the free market to keep home prices in the bubble. This can't go on forever.
3) Our Banks are insolvent, many households are insolvent and our government has much more debt than it can possibly pay back. If the government stopped borrowing money we would go into severe deflation. Which means there is almost no chance of true asset inflation in the near future.
4) As interest rates go up in the future it will be a huge headwind on home prices.
I really can't think of any reason to rush into a home now. Yes prices are down but they are far above historical trend. This attests to the magnitude of the bubble.
So as a buyer I am keeping my eye out for a good deal and definately for a home that I love.
Flippers can't get rid of their inventory and are lowering their prices, often taking losses on homes bought at the trustee sale. REO's are sitting longer and the banks are dropping their prices too. These two factors plus all the short sales leave equity seller hanging hoping for a recovery in the spring.
Other than interest rates there are few reasons for buyer to get off the fence. Sure there are some good deals out there but it's not like prices will rise for another two years.
"OC home values have turned over and are diving again"
Actually, nothing is further from the truth. The median price - for Orange County, Ca - is actually 10% higher - at least - than it was 24 months ago.
The only thing "DIVING" in Orange County is the checking account balances of perennial tenants like Mr. Blue.
Keep kissing that rent money "Bye-bye, Bluebird", every month.
There is a huge looming inventory that needs to be cleared out before we see any stabilization in the real estate market. 14% of the 54 million first liens in our country are delinquent or in default. As soon as we get "less" help from the Government, we will see the market find it's bottom and start to recover. Until then, all the numbers you see are artificial. You can stay tuned to inventory numbers for Laguna Beach http://www.ochometalk.com/laguna-beach-statistics/ .
There are many optimistic buyers in the market right now. Even with a potential downside in the future, interest rates are great and prices are very affordable. Investors can get positive cash flow with little down, and homebuyers can find a home with a mortgage that is less expensive then renting.
Guess what the sky is falling! I would say if you bought in 2006 you are upside down but not now. There are great buys in Laguna Beach right now. You can get an ocean view property for less than a million? Everything is at a 40 -50% discount. How can you beat that? By the way if you are financing rates are creeping up so don't wait too long. A lot of folks have priced themselves out by thinking the rates were going lower.
Within the past 6 weeks borrowers have lost from 10 to 15% of their buying power, due to the increase in mortgage rates. Also, guidelines are continuing to become more stringent. What a borrower could qualify for today, they may not qualify for in the future.
There are areas in OC where values have gone up and 23 cities where they have gone down. I believe the largest decrease in value was around 3% for the past 12 months.
I think this is a case-by-case decision. All buyers do not think the same.
Happy funding, Rudi