The top end of the housing market in Fresno & Clovis markets is being hammered by very few buyers (300K and up); however the bottom end is doing good (220K and below). Remember in the 1990(s) our employment rate in Fresno County averaged 18% and real estate did nothing from 1992-1999 when adjusting for inflation.
The 10-year treasury notes are up almost 100 basis points higher then in November so the bubble in the bond market may be getting ready to burst and this will in fact send long-term interest rates higher. Higher long-term interest rates will be a drag on the real estate market and place downward pressure on prices going forward.
We are in trouble going forward without job creation in a big way because since interest rates peaked in 1982 we have been living off credit for nearly 24 years when the credit bubble final burst in 2006. This addiction to credit has been devastating for our economy and caused a massive amount of wealth to evaporate in the real estate and stock market in the last 8 years. In some ways, our addiction to credit was allowing us to get high just like people who use drugs and overdose. Well we finally reached the breaking point in 2006 when the bubble started to deflate and assets prices started to collapse. The next bubble is in consumer credit cards and huge spike in defaults that will occur resulting in more bank write-downs for financial institutions.
We should start by living within our means for a change and save money for a down payment for a house then consider purchasing one. Time is on your side when it comes to purchasing real estate. Remember this mess we are facing today did not develop in 5 years, but more like 20 years so it will take a long time to clean up.
Everyone wants to know...
As we see it, when addressing this question, regardlessof the target location there are 3 market segments that need to be considered:
1.Foreclosures-generally considered to represent the bottom or very near the bottom of the market. Nationwide, foreclosures sales are establishing the identity of the "new market." Prices may settle slightly lower but we are seeing offers on foreclosure property coming in above the asking price as opposed to 10-20% below. The offers for foreclosures in your target location are showing above asking price offers.
2. Short Sales-These sellers, "caught between a rock and a hard place," are at the mercy of their lender. Banks that have refused to work with desperate sellers in many cases will need to eventually support these price decreases to remain in step with housing inventory that is selling. The reality is we can expect that most of the short sales that don't sell to end in foreclosure. It would be fair to assume this portion of the market will see pricing adjustments to keep pace with the "New Market."
2. All other homes-This is where we can expect to see the greatest decline in home prices. As more and more of the "new market" prices begin to impact the fair market value banks will be forcing these home prices to drop as well. Since the housing market is largely based on credit most buyers persue mortgages that need to be appraised. Banks can not finance property that appraises for less than the sale price. This is the market sector that will see the greatest decrease in pricing.
In response to you initial question, the New real estate market is in the process of evolution that indeed will see price declines but it's important to understand it is quite involved.
The Eckler Team
Michael Saunders & Company