The votes are in: How low can home prices go?
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Of the 691 readers who participated in our recent poll, a close 53% (369 voters) believe California real estate market has finally reached its bottom in pricing.
The other 322 voters were less optimistic. Home prices, while low compared to the unprecedented highs seen in the Millennium Boom, have yet to dip below their historical average (the equilibrium trendline) and gain the momentum needed to propel the housing industry out of recovery mode. Jobs are another significant influence on home prices – as buyers can only purchase if they have steady income to qualify – and about 950,000 jobs have yet to be regained before California employment returns to pre-recession levels.
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About The Author
ft Editorial Staff
is the writing staff comprised of legal editor Fred Crane, In-House Broker Consultant Fernando Nunez and writer-editors Connor P. Wallmark, Giang Hoang-Burdette, Jeffery Marino, Carrie B. Reyes, Sarah Cantino, Matthew Taylor, Matthew Shade and Nicole Jessen.
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Logically, this market can’t go up yet. While these little blips are typical of a depressed real estate market the big boogie man lurking is two things:
1. HELOCs which start to reset in 2013/2014, in which the payment shock of a interest only loan going to fully amortized over 10 years will bring many consumers to their knees. They gave them out like candy.
2. Option ARMS have been artificially kept down and preventing from resetting by very low LIBOR rates of which most are based on. Since most homeowners are performing on those loans, the payment shock of those resetting is about to reach its cusp… 5 years… 2007/2008 vintage.
When those hit… only the most wealthy of wage earners can handle it… leaving the rest to throw in towel… unless of course the lender kicks the can down the road some more. Not sure how they do that on HELOCs.
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