[quote=bearishgurl][quote=deadzone]Can you give some specific examples of these “micro areas” where you think the bottom as passed?[/quote]
deadzone, I haven’t studied the incidences of Trustees Deeds being recorded, incidences of successfully-closed short-sales, incidences of REOs sold or incidences of owners being underwater in a particular “micro market,” but suffice to say, if owners that can wait for a better day to sell in your chosen “micro market,” they certainly will.
If you are in the market to purchase residential property and want to determine if the bottom is past (or now here), I would first determine the exact subdivision or micro area (if a “custom-built area) I was interested in and then conduct the above studies for myself, taking into account the total amount of residential units built in your “micro area.” If the majority of the recent “sold” comps are being generated from nearby “distress” sales and/or there are four or more Trustees Deeds recorded in the last six months per 100 properties in your micro area of choice (=>4%), then there may still be bit of “froth” in current sellers’ asking prices if they do not conform to the (very) local market realities.
OTOH, if you are interested in purchasing in an area where there are few recent sold comps due to lack of inventory and the area/subdivision is more than 33 years old, I would buy a plat map from the County Assessor for $2 a page and check its APN numbers against the assessor’s tax payment website for the prevalence of Prop 13 owners still on the tax rolls (existing owners, whether residing in the property or not). If the prevalence of “Prop 13 owners” is => than 20% and there are very few sales in the last ten years, then it is very possible that the owners there don’t NEED to sell in this “down-market” and can wait for a better day.
Regardless of Prop 13 status (affordable taxes), the biggest indicator that the asking prices may be too high in a particular area is a large percentage of local owners have encumbrances equal to or more than what their property is worth. This could signal future distress sales/walkaways, spelling an erosion of your own future property value AFTER purchase.
In all cases, I would closely study the comparable “solds” of my target property on SDLookup or other site which has sales history of a listed/sold property of close neighbors’ purchase prices in the last ten years (even if not currently in default) to determine if an asking price is too much.
If your desired property is situated in a micro-area which is more than 50 years old, I believe that after you conduct the above “exercises,” you may be shocked to learn than a very slim minority of owners there are currently in the “need to sell ASAP” category. In this case, if the seller of your desired property can’t get what they think is a fair price in accordance with their location and overall condition in comparison with the few recent sold comps that are currently available, they have the option of taking it off the market and waiting for a “better day.” Many of these older areas are VERY stable and have already “hit bottom.”[/quote]
But you’re assuming that this is a “down” market. Many of us would say this is a very good market for sellers because bubble/artificially high prices are still being propped up by the govt/Fed.
The prices seen in the 2002-present period were/are the result of a **credit bubble** and subsequent govt/Fed intervention. There is no reason to believe 2004 or 2005 prices were “real” or based on fundamentals in any way.
Sellers do not determine price, willing and able buyers do. It is not foreclosures that are determining today’s prices, it’s the manipulation of the Fed/govt that is driving prices. If not for their interventions, prices would be much lower than they are now…and that would be their FUNDAMENTAL value.
Everyone is too focused on foreclosures, rather than focusing on future buyers and their willingness/ability to pay current prices.
It’s also the case that most home sales happen because people want/need to move. In normal circumstances, people don’t sell just because the market is good or bad; they sell because their family is getting larger/smaller, they get a new job, have health problems, a death in the family, they move into a nursing facility, or to be near their children or grandchildren, etc. These owners with paid-off properties have the luxury of being able to sell in ANY market, because they will likely net far more than what they paid for the house.
I’ve had to sell both of my parents’ houses and properties when they died, and had no problem undercutting everyone else around them. I was not wed to bubble prices because everything was paid off, and I wanted to deal with everything as quickly and efficiently as possible. People have this strange tendency to believe that heirs have some kind of attachment to a house, and that they wouldn’t be willing to sell for market price, but that’s totally untrue in most cases I’m aware of.
Let’s make one thing perfectly clear: This is a seller’s market. There is NOTHING about this market that favors buyers.
