What’s Your Prediction For Next 12/24 Months?

[an]

I vote for small 4-6% median decline like this year. But like-for-like will decline another 20-25% if not more. Price will continue decline but buyers will buy at the price point they planned to buy from the start. They just get more house for the $.

[Anonymous]

Why would 2007 see equal or less depreciation than 2006? Think psychology. It wasn’t until around August or September that the masses even started realizing that there was a decline this year. Thousands of sellers pulled homes off the market this year thinking they will sell in the spring. What happens when there’s no spring bounce? Interest rates are also very low. What happens if they rise again or if the economy slows.

The way I see it, everything is stacked in favor of a much larger drop in 2007, and I don’t see any compelling evidence that it will just be flat or even equal the 2006 price drops. IMO poor spring sales data will be a signal that this thing is really going to kick into gear. Higher interest rates will be icing on the cake. There are far too many people barely squeking by, and many of them are betting on relisting in the spring. Follow some of the specific examples of neighborhoods and properties listed here and other blogs and you quickly see that this thing is just starting. Some of these folks can only hang on so long. Once that last bit of hope is exhausted, along with the cash used to hang on, we will see larger discounts and desperation kick in.

[Anonymous]

I agree completely with juice’s chain of logic.

[Anonymous]

I’m not sure. I understand the median household income for Southern California is around $70K. (Though I find that hard to accept.) I understand the mortgage industry’s affordability rule is (or should be) 2.5 times household income. So if household income is ~$70K that means affordability is somewhere around $175K. This implies there is a huge disparity here when you consider a decent median home in SD or Orange County is going for $400-500K plus! Even if you double the median household income to $140K it is still not close enough to make sense. Any wonder why many homes in the $500K (asking) plus range are hard to sell? With that, I see a drop of more than just single digits. Simply stated, your mortgage has to be within the means of your salary- for most of us at least.

[SD Realtor]

Juice I am sincerely hoping your logic turns to reality. My fear is that interest rates will be lower but it is hard to say. Right now the 10 year treasury yield is a tad higher then it was a year ago but it is trending down. Last year the rate hikes were trending in the opposite direction.

I ABSOLUTELY agree with you that we did see extraordinary inventory last year, and we saw a 30% DROP in sales each month over the past. So where did all the listings go? Like you said, they came on the market and simply didn’t sell. Sellers pulled thier homes. So the litmus test is, will those sellers return en masse…If they do, will they price to REALLY SELL or will they simply ride it out again and give up? Finally will lenders let people refinance who are in financial distress…(see other posts)

I do hope your scenario plays out…

SD Realtor

[(former)FormerSanDiegan]

SD R –

Excellent point regarding the pent-up supply. I suspect that 2007 will have comparable sales numbers to 2006, maybe down another 10% or so. A lot of this pent-up supply will still be out there after the next 12-24 months and 10-20% decline in prices.

[ibjames]

I think as this thing hits the media more and more, people will listen, and when realtors tell them they have to price competitively they will. Until now there wasn’t rampant news coverage about a declining market. So realtors would say “bring the price down” and people would not listen. In 2007 they will be bringing their homes onto the market knowing this.

The people that already have tons of equity might not put theirs back up knowing that the market is bad, but people that were hoping to make a profit might drop prices hoping now to just break even.

I can’t quote percentages, but that’s how I see it.

[Author]

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