California Home Sellers Receive Worse News For '07

The real estate market has been bad over the past year and is expected to get even worse, at least in California.

California has experienced record year-over-year sales declines and has also begun to experience single-family home price declines for the first time in over a decade.

Since the end of 2005, the real estate market in California has been struggling to support the over-inflated prices generated from the 2000-2005 “booming” years. Mortgage defaults are up and sellers are crying for a break; something that has not been requested from California sellers for a very long time.

The article, “California real estate forecast calls for price decline in '07” posted on the October 19, 2006 edition of Inman News, explains how California home sellers may want to ask Santa for a break next Christmas because the 2007 prospective does not look positive.

“The median home price in California is expected to drop 2 percent in 2007 compared to 2006, according to a forecast released this week by the California Association of Realtors trade group.”

“The median price of a home in the state is forecast at $561,000 this year and $550,000 in 2007. That compares to an expected 7 percent increase this year compared to 2005, a 16.2 percent gain in 2005, and a 20.9 percent rise in 2004.”

A two percent decrease in price initially does not sound too significant but when compared to the previous few years’ percentage increase it is a catastrophe for those who expected to sell for a large profit within the next couple of years, especially for home owners who purchased their property within the past year. This current California real estate market has no room for flippers.

“Meanwhile, single-family existing-home sales are expected to drop 23 percent this year compared to 2005 and fall another 7 percent in 2007 compared to this year, according to the 2007 California Housing Market Forecast. Sales were up .04 percent in 2005 compared to 2004, up 3.8 percent in 2004, up 5.1 percent in 2003, and up 13.6 percent in 2002.”

A decrease in sales also relates to an increase in the supply of listed properties for sales. This gives buyers a chance to pick and choose the house they want at the price they are comfortable with.

So, even if you have owned your California home for several years and are going to make a significant profit anyways, you may have a difficult time finding a serious buyer.

Incase you are a prospective seller and are not deterred from this news, mortgage rates will also add to your frustration as buyers will be more willing to wait for lower rates and in turn, lower prices.

“The rate for a 30-year fixed-rate mortgage in the state is expected to be 6.5 percent this year and to rise to 6.7 percent next year.”

You will have to stay positive and remember that the market always changes and will eventually change for the better (at least in the seller’s eyes).

“Although the 2007 sales decline is not expected to be as steep as what we experienced this year, the psychology of the market -- matching the differing expectations of sellers and buyers -- will continue to be a factor as Realtors help consumers navigate their way through a changing market.”