[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.”
