I think it's important to look at the major economic factors: mainly, what does the job situation look like? As of December the unemployment rate was at 7.8% nationally. It has decreased but due in large part to the number of people exiting the work force. Plain and simple, people won't buy houses with stable income. Furthermore, if people on paper show good employment and income history but they are concerned about their company downsizing or the stability of their job they also may delay a move.
There is no question that the inventory has been extremely low in my local market (North County San Diego). I've met with multiple sellers recently and we looked at comps together, decided the value of their home, and then listed relatively high for negotiating room. Two of those properties (785 Hollowbrook in San Marcos and 13455 Granite Creek Rd in Sabre Springs) then went over asking with one cash and the other conventional buyers. The demand hasn't increased but with supply shriveling up it's driven prices high.
Inna, I completely agree with your assessment about appraisals being behind the frenzy curve. I spoke with an appraiser yesterday (on a property that my buyer wrote a full price offer on and it appraised $12,000 short) and he said that value and market value are two different things. If I'm selling a baseball card, the card is worth what someone is willing to pay for it. If I'm selling a house and the buyer is getting a loan, it's not so easy.
I do believe that the market will continue to increase for several reasons. First off, the banks won't bring an incredible amount of inventory to the table all at once. It hurts their potential for income and I don't really believe the amount of inventory being held (the so-called "shadow inventory") is really as much as everyone says. The Fed has made promises of keeping rates low for the next few years and have recognized that that has really stimulated the economy. As the entry levels continue to be competitive and frenzy-ish, I expect the market will continue to be pushed (hopefully, more slowly) in a positive direction.
Feel free to call or email me directly to discuss this more.
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