When you factor in that you won’t be able to get a jumbo loan (over 417k) at a reasonable interest rate and that qualified buyers will be in very short supply, my guess is that the price by the end of 2008 will be closer to $440-$450k. I also think that if you wait until the end of 2009-2010, these types of properties will sell for around $375-$400k.
Why? (1) Investors won’t buy them to rent out unless they can receive a better return on their money than they can get from a CD or the stock market. (2) Foreclosures are going to get a lot worse than they already are which means lower prices and a glut of homes to sell. This means that anyone who is NOT in trouble with a re-setting, adjustable ARM and who will not be upside down on their loan…… but who has to sell their property due to job loss, health problems, job transfer, etc……….will have to match or beat the prices that the foreclosures will be selling for. Right now, the inventory of listed, unsold homes in L.A., Orange and SD counties combined is almost double of what it was a little over a year and a half ago. You can’t have rising foreclosures, rising inventories, lack of qualified buyers due to new loan restrictions, etc. without having drastically falling prices. They may fall in chunks or start free-falling within the next month……who knows? But………they WILL fall. When they fall, they won’t recover for years and incomes are not going to rise enough/fast enough to enable enough new buyers to qualify for a mortgage. I can’t imagine any more foreign banks or brokerages buying any more horse-crap, sub-standard home loans from the USA or anywhere else after what happened the last couple of weeks in France, Japan and the USA. Be patient, save your money and you will know when the time is right to buy.
BTW: I sold my house in SD in April of 2005……..cashed out and moved out of state. When the time is right, I will move back and buy again. My wife and I saw this coming like an elephant running in our back yard back in 2004.