Bp

Sure, I'll throw in my $0.02! I'll plagiarize myself from a Redfin forum:

No way, no how I'm putting out an offer that's anything more than 30% below CURRENT comp sale prices. I've been reading a LOT about this subject, the more I read, the more I find a common thread - home prices will likely still fall between 20 and 30% of where they are right now. Yeah, yeah... I don't have a crystal ball, nor does anybody else. But if you look at what's happening in the central valley - Fresno, Sacto, etc... it's scary. Some places are down 50% already.

Now think about what can happen to the 20% down payment that the lenders are currently demanding to get the best rates... the market goes down 20% and *POOF* your hard earned, after tax down payment gets wiped out. All of a sudden you have 0 equity in the house you just bought.

The market will not start going up until the poisoned debt is flushed from the system. 2008 will see a wave of resets on ARMs, which is a 6 mo. leading indicator (it can take that long from the date you miss your 1st payment until the property becomes REO and back in the market). But that's not all, mid 2009 will see another wave on resets on option ARMs, which I can only believe a higher percentage of these will make it into the REO category.

Once the market hits bottom, it's not like it will skyrocket back up, it will take a while, credit will likely be really hard to get (from the few banks that may have stayed afloat) and a lot of folks' savings are getting hit hard by recession and inflation - there won't be that many buyers!! people will be freaked out about buying (maybe even more than we all are now).

The market will be at the bottom - in my humble opinion - when houses are affordable to the average family again. And by my calculations there's a lot more downside than there is upside right now. Economic conditions continue to weaken, commodities (the next great bubble) are through the roof, jobless rates keep rising, recession is upon us. Don't look for the residential market to recover until underlying economic conditions start to recover. Save your money, don't put it in the stock market for crying out loud! Be in CASH when the indicators point to the market recovering.

Track the home affordability index. Be patient - it will be years.

OR... put in a lowball offer for no more than 70% of comp sales in the last 30 days. But don't count on sellers to think you're being serious, and definitely don't count on bankers to jump at the chance to clear property from their books - they'll continue to be in denial right up until they get bailed out.

Good luck!! - Fri Apr 11 2008, 22:06

Thank you very much Sandra! great web references! - Thu Apr 10 2008, 20:59

I wouldn't call this an "answer", but more of an extension of the question. Looking at Aliso Viejo sales prices vs. listing prices there seems to be a discrepancy.

Compared to Aliso Viejo
Avg. listing price: $600,070
Avg. sales price: $487,917
Avg. price/sqft: $301

Is this because the more expensive homes aren't selling? Or are listing prices still this disconnected from recent sale prices? - Sat Apr 5 2008, 22:28

I work 2 blocks away, a lot of commuters come to this area of Koreatown. The neighborhood is actually not bad, I would say it's in an upswing. There are quite a few rent controlled properties around, a lot of older apartment buildings, many of which were built before 1950.

A lot of businesses in the area as well, great access to the Metro on Wilshire/Normandie and Wilshire/Vermont... - Wed Apr 2 2008, 22:24

Well, here's what I consider "reasonable" and again, it's my opinion.

See if you can find the latest "pre-bubble" sale price for the home in question (pre 2001). Then add 6.2% per year to that sale price. Another way to do it is to adjust for inflation and add 0.4% per year - there are inflation calculators out there. That gives you what the price of that home "should" be if there hadn't been a bubble, and still gives a decent, normal rate of appreciation to that piece of real estate, based on the last 30 years of appreciation history. This a real eye opener here in Southern California. Applying that formula to many of the homes for sale in the area shows that many sellers are still upwards of 30% above what the value of the homes would be (sans bubble). And sure, the real estate market may recover tomorrow, but I wouldn't count on it. If you do make an offer, you should account for what you think the market will drop further, you may be laughed at now - just leave your business card with the realtor, they may call you back before the end of the year!

Good luck! - Mon Mar 31 2008, 22:05