We hear something about the ‘real estate crisis’ or the ‘financial crisis’ almost every day in the news. What is the real estate situation like here in the Inland Empire, and what does it mean for you? I can’t see in to the future nor do I have a secret time machine, but I am willing to share some insight based on recent local statistics and my years of real estate experience.
First off, the bad news. In 2008, the Inland Empire experienced record foreclosures and California’s largest home builder (KB Homes) reported a 53% revenue drop from 2007. According to Default Research Inc., there were 64,144 foreclosures in San Bernardino County and 82,072 in Riverside County. San Bernardino County’s median home prices fell to $185,000 in November and Riverside County’s fell to $220,000. This is bad news if you are a homeowner, and great news if you are a first-time buyer.
The (somewhat) good news: here in our area, homes are still selling, but at a slow pace. In 2008 our local MLS (Multi-Regional MLS) reported 512 home sales in Yucaipa, 53 in Calimesa, 519 in Redlands and 704 in Beaumont. Keep in mind that the MLS data does not include for-sale-by-owners, builder sales and a few other unique sales situations. Houses must be priced appropriately and marketed aggressively, and sellers need to be realistic about today’s market conditions.
So, what does this all mean? No one can predict the future but 2009 should hold hope for those still wanting to buy homes. While buyers are finding great deals on homes, they are not finding lenders who are eagerly waiting to lend money. Most buyers are finding that if they do not have near-perfect credit, at least 3% down, and a reliable source of income that they may struggle to get financing. It isn’t the end of the world for everyone as there are still loan products for buyers who do not fit the ‘perfect borrower’ scenario. In this day and age, it is ever-more important for buyers to get pre-approved (not just pre-qualified) for a mortgage BEFORE they begin shopping for homes.
For current homeowners, the news is scary. Many have watched their home equity shrink while others face foreclosure and the possibility of going back to renting. Some homeowners who have depended on their home equity line of credit as an emergency cash fund have found their equity lines frozen by cautious banks due to loss of equity. For those who have been homeowners a long time, they know we are just amidst a downward trend. Home prices go up, and then they go down. Our local market definitely will face a long-term correction from the rapidly increasing prices earlier this decade, but when history repeats itself, prices will be back on the rise.
Here’s some advice for 2009. Anyone who is renting should take the steps towards the path of home ownership. Prices are favorable and interest rates are low. If you already own a home, stick with it. If you can’t make your payments, talk to your lender and come up with a solution. In my opinion, if you do not absolutely have to sell you should stay put. Keep in mind many corporations have relocation programs where they will buy your house if you agree to relocate; don’t forget to negotiate this with your employer if you are offered a new job elsewhere.
While times may be tough, the American Dream of homeownership is not a myth, but a reality for millions. Americans are still building long term financial security and wealth through home ownership.
Let me know what you are thinking. Let me know your questions. Submit a comment on this blog entry below.
