California Real Estate Crash?

The Norris Group released this update recently and it paints a uncertain or even negative future for real estate in the near to mid-term. Bruce Norris has invested a lot of time and money in this forecast and his last major report forecast the big boom in California very accurately - so this deserves more than a casual glance.

The summary is that Investor and second home purchases are around 47% of all of the homes bought over the past year. That's up from the normal 10% [yikes].

Historical Housing Median Prices
. . . . . . . 2004 . . 2005 . . 2006
January . . $404,460 $485,700 $540,000
February. . $391,550 $470,920 $535,480
March . . . $428,060 $496,550 $561,350
April . . . $452,270 $509,630
May . . . . $463,690 $522,900
June . . . $468,620 $543,120
July . . . $462,140 $540,900
August . . $473,360 $568,730
September . $463,620 $543,980
October . . $459,800 $538,770
November . $471,980 $548,680
December . $474,280 $548,430


The California real estate market is heavily dependent upon two things: The continuation of cheaper than market payments when people buy real estate and the mental outlook that real estate is still the “hot ticket” investment. Without the positive outlook, there’s no way a many of us will be signing up for the 50 year “easy payment” plan.

California foreclosures headline April 10, 2006, PRNewswire

“Los Angeles Foreclosures increase dramatically; 63% from 2005 to 2006” “The rising foreclosures are due to the ‘Average Joe’ buying a house he cannot afford because of inflated
home prices. Then, with interest rates rising, he cannot pay for the mortgage. Many of the homeowners used ‘aggressive financing to buy homes they could not afford.’” – Serdar Bankaci, President of Default Research, Inc.