Oct 09 2007
It’s a Stalemate In the California Real Estate Market
by R. Sebastian Gibson, Attorney and Realtor, Rancho Mirage, California
The bad news is there for anyone to see. It’s on the newspapers, it’s on the TV and it’s coming from all the financial advisers. The housing market in California is looking bad, real bad. New home sales are down, existing home sales are down, mortgages are hard to get. The latest pronouncement is that the housing problems may not peak until 2009, two years from now. In the interim, articles are now coming out in the financial sections that we can expect double digit declines in the price of housing over the next few years.
But a strange thing seems to be happening. Every time the actual figures come out, we see that in many markets, the median price of homes continues to rise. And while foreclosures are up, and while it seems that more houses are on the market every month, the prices just do not appear to be tumbling like so many experts have predicted.
So what is happening here, huh? What we have is a good old fashioned stalemate. It’s like a game of chicken, only no one except the new home builders appear to be blinking, or running their cars off the side of the road and into a ditch.
Home sellers are, for the most part, still refusing to drastically cut the price of their homes, even those who had some serious equity built up in the values of their homesteads. Why? For the most part, they just refuse to do it. Some say, they would be a fool if they did. Others may have sucked some or most of that equity out of their homes and perhaps aren’t in as great a position as people think.
As for the home buyers, as much as a buyer’s market as one would think it would be, most buyers are looking at this market and saying to themselves, that they can wait. Indeed, the financial talking heads on television are telling them to wait. More than that, they are hearing advice that says, “Don’t you dare buy a home right now. If you do, it won’t be worth as much a year from now.”
So while there may be sellers out there who, upon being presented with an offer substantially less than their listing price, there are far fewer sellers even willing to make an offer. Open houses go without a single visit from a home buyer. And consequently, in the middle of the night, the moving vans come and homeowners are beginning to abandon their homes. Such moving fan stories are being heard in Phoenix, in Las Vegas and may soon be heard in a neighborhood near you.
So what’s to be done? How do you end a stalemate? I don’t think it ends gradually. Not in today’s age of short attention spans. People today want things to change more quickly. The federal reserve may need to lower rates aggressively a few times before the state of the market changes. While some will say that such action will raise the risk of inflation, others will argue that unless this situation changes, the housing malaise will continue to bring down the rest of the economy.
Meanwhile, the global economy continues to roar along, except perhaps in Japan, the stock market continues to make new highs and the federal reserve bankers may be tempted to say to themselves that with the rest of the economy humming along due in part to the sinking dollar making exports do well, the fact that the housing market is weak may keep inflation in check.
And you know what that means, don’t you? You have another stalemate. My best guess is that this is the state of the market for now and we may just be staying in neutral until buyers again become buyers and sellers again become sellers and people become more willing to negotiate.
Sebastian Gibson is an attorney as well as a realtor and broker with Sebastian Gibson Properties in Rancho Mirage, California (760) 568-1640. The website for Sebastian Gibson Properties is www.SebastianGibsonProperties.com
