Consider this: two years ago, in August, we had 7,209 homes for sale in OC. As of yesterday, ZIPRealty.com showed that there were 20,024 homes for sale in OC, or nearly three times as many as we had just two years ago. Three times as many properties and probably a third as many interested/qualified buyers--its a recipe for an epic market decline.
In February of this year, I wrote about a bet I had with a real estate agent friend. In that post, I explained that he and I had a bet as to whether or not the total amount of inventory of residential properties for sale would pass 20,000 units at any point in 2007. We kept the bet friendly at $100. I spoke my Realtor friend this morning (who I think was kidding when the threatened me with bodily harm if I revealed his name (besides, I could take him)) and he's agreed to pay on our bet.
Now don't get me wrong, the $100 is nice. Being right is even nicer. But 20,000 homes is one hell of a lot of property. With the profound tightness of the lending markets and the exodus from California at this point in time and history, I have to wonder who in the hell is going to buy these homes. And, with the loan resets coming due later this year and all of next, I can only see more inventory in the months to come. But where will the buyers come from?Unless both prices and interest rates drop precipitously, I think the answer (apart from the odd ex-pat foreigner) is nowhere.
Houses are too expensive, the market too weak and rents too cheap to even consider buying right now. In my opinion, even houses 10% below market are unattractive. For housing to rebound, we would need prices and rates to conspire to effectively lower prices an additional 15-20% before buyers are going to jump in with both feet.
Agents, you've seen me joke about it, you've heard me prod, but now I am being dead serious. This market is not going to recover until the cost of homes drops dramatically. If you want transaction counts (read: commissions) to rise, you have to convince sellers to lower their prices today. Talking up the market is only delaying the inevitable decline in prices and keep you from earning your commissions.