Where is bottom of the Market ? and how do we know ?

Asked by Bill Snyder, Yuma County, CO Wed Nov 14, 2007

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Mike Kelly A…, Agent, Santa Rosa, CA
Wed Nov 14, 2007
Christopher's answer, in general I agree, as I have no idea when this market will bottom. I've yet to hear a big thud over in the central valley! The prognosticator’s are in overtime with their predictions. I personally think the NEW HOMES are going to get hammered the most as production housing was overbuilt, had huge Seller incentives attached, "take-my-pulse" loan qualifying and price slashing still being done with surplus inventory having been built for phantom buyers who turned out to be investors. We don’t know what percentage of the market in the past 5 year consisted of homeowners or investors?

In our area the more established, older homes and areas have retained values and have little REO/Short-sale activity. They all regularly out perform the new homes being built in price, days on the market and price stability. Our new home areas have ungodly foreclosure issues happening and slash and burn builder activity.

I think it is affordability driven here in California. The reason the funny-money all started when it did was due to the consumer NOT being able to afford a home with traditional financing. Here in Sonoma County, California, our affordability index got as low as 12%!! That meant only 12% of the population could afford a home with the county's median income. And that just didn't happen overnight. It took 4 years to drop to that point but since we had appreciation and folks able to refinance and move onto the next predatory loan we all were fine! Unemployment, Wages and Affordability--the holy trinity.

I remember in Palm Springs, Coachella Valley, and median price in the low $200's but affordability like at 14-18%! Huh? Wages! A complete "service sector" economy. Employment consisting of those taking care of retirees homes! Pool guys, gold course maintenance workers, housecleaners, fast-food, restaurant workers, landscapers, etc. $10.00 hour wages ain't going to get you a home!

Here in our County we just had a big series of articles in the local daily taking on the sub-prime lenders. One guy tried to justify putting someone into a home with an income of $40,000 and a home price of $410,000! Now Really!
2 votes
Diane Glander, Agent, Spring Lake, NJ
Thu Nov 15, 2007
You will know when the market has bottomed out because prices will start rising again.
Web Reference:  http://www.dianeglander.com
1 vote
Christopher…, Agent, Hemet, CA
Wed Nov 14, 2007
Anyone that has the answer to this question definitively is in the wrong business. What we are experiencing now is unlike anything the industry has seen. It will be an interesting ride but, when you see decent homes in decent areas of southern California going for less than 200k.....it does not take much to do the math. Older homes have been hit much harder than newer homes as was to be expected and reasonably so. When a 1960 run of the Mill home on a small lot and in an average community sold for as much, if not more than a new home, even if the mortgage market did not do what it did, something was amiss.
1 vote
J R, , New York, NY
Wed Nov 14, 2007
The bottom of the market won't come until exiting inventory is depleted to a more "normal" level. As long as there is a 10 mo or more supply of inventory, the bottom isn't in sight.
0 votes
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