Mike’s Real Estate Show

Interesting forecast and number: 38%. Not 35% or 40% but 38%! I would love to see their assumptions to arrive at such an exact number. My criterion for price drops centers around the “shaking out” of the loan debacle. We just had Chris Thornberg of Beacon Economics, formerly of the Anderson School at UCLA; speak at a breakfast here in Sonoma County. His take is the mortgage implosion will bring down the house of cards buoyed largely by unsustainable lending which originated in the past three years.

The height of the “re-casting” of these loans will be third quarter of 2008. So 2009 will be a very interesting year!! . He is predicting a 35% drop from the high of the market which matches the date set by Fortune. However, this is centered in the price segment where the largest incidents of unscrupulous “incentive based” lending occurred and that price point for Sonoma County is $400-$750,000. Mr. Thornberg’s record for predictions is very, very good. He stated further we have a 75% chance of a recession at this time. On the flip side, the California Assoc. of Realtors chief economist, Leslie Appleton-Young, is predicting 4% fall in prices next year. I think what we have here are the two “extremes”! Leslie is in fairytale land and Mr. Thornberg has California falling into the ocean!  In our area we’ve seen some neighborhoods unaffected and some with 20-30% price drops!  I think making One million dollar offers on two Million Dollar homes is a bit silly and very paranoid but 20-30%? Who knows? In lovely Marin you’d get laughed out the door with anything BUT a full price and sometimes OVER bidding! Why? Resources, supply and demand, location, location, location!
  Seek out your LOCAL Realtor, get LOCAL data and make an offer based on this LOCAL information. The “Cheerleaders” we now have in our industry are doing just as much damage as those predicting Armageddon!! As usual we have middle, realistic ground which needs to be sought.