6August2008

Experts Seem to Agree on How Much Further Prices Will Drop

Posted by staceysloan under: Housing and Economy; Housing Recovery.

Real Estate Economics, a homebuilder consulting firm in Irvine has this to say about the Orange County housing market: “Opportunity/Risk Index currently resides slightly below equilibrium, but the trend is toward equilibrium.  Any O/R index above equilibrium represents market opportunity, and any index number below equilibrium represents market risk… Within 12 months, (the O/R) index should reach equilibrium… There is a need for an additional 5.6% drop in housing prices before equilibrium is reached in the Orange County Market.

The Kiplinger Report thought the drop would be 10% in 2009 saying, “Home prices have a ways more to drop before leveling off late next year, then staying flat during most of 2010.  Difficulties will vary by region.  The Inland Empire and Central Valley are sure to have the biggest price drops.  Orange County and San Diego prices won’t fall as much.  Bargain hunters will spur sales, probably by year end.”  We are definitely experiencing that right now.  Sales picked up for the first time from May numbers to June. (The latest numbers that are available for a full month.)

Broker and local economist Tom Moon’s predicted price drop for next year, also 10%.  Obviously these projections are on top of the already 20% to 25% we’ve seen, depending on the location of the property.  So we are looking at a grand total of approximately 35% before we are done.  Is there anyone reading this that doesn’t see what impact this will have on the affordability index and how it will spur sales with old fashioned supply and demand.  Don’t forget we still have people arriving here that need to buy, we still have a lot of people who were left out of the sub-prime run up and if you read on, you will see that we still have decent economic prospects in Orange County.