Chico CA Real Estate: On the Sunny Side!
May 24th, 2008categories: Chico CA Real Estate News
by Mike Wiegert
Last week at the National Association of Realtors (NAR) Midyear Legislative Meetings and Trade Expo, chief economist Lawrence Yun stated that home sales and prices throughout most of the country are poised for improvement in the second half of 2008 and that recovery will vary by market. Yun went on to blame the softening of the housing market last year on the “subprime mess”. Unqualified borrowers with scanty credit were given access to subprime financing with little or no equities. As these adjustable rate loans are being reset, borrowers find themselves unable to make the adjusted payments on the loans and subsequent foreclosures result. “In fact, if you look at where home prices fell the most, it’s the markets where subprime loans were prevalent,” Yun said. Cities with a high percentage of subprime lending are where the markets suffered the biggest downturns, he explained.
With these foreclosure sales thrown into the mix or data used to determine comparable sales in the market, the apparent market value of homes is pushed downward. An interesting twist to that situation is we’re now starting to see Chico homebuyers and investors competing for foreclosed homes. As a result, a sharp decrease in the margin between asking price and actual sales price is becoming evident.
Mmmm… let’s do the math: increased demand for foreclosure sales + increasing sales prices on foreclosure sales + market stabilization in the non-foreclosure market = market prices beginning to rise.
Is this all poppycock? Not at all! Many areas around the country are recently posting modest increases in sales prices. These areas include many portions of New York State, North Carolina, Washington State, Oregon, Wyoming and Utah. In fact, according to the Office of Federal Housing Enterprise Oversight (OFHEO) from January 2008 and February 2008 (month over month reports) overall U.S. prices were up 0.6 percent and 77 percent of the Metropolitan Statistical Areas in the U.S. reported price increases. Several markets that have seen price declines of 20 percent or so are turning around, Yun said, pointing to San Diego, Detroit and Fort Myers, Fla. Yun continued by forecasting that many mid-America cities such as Cincinnati, Milwaukee and Kansas City, MO are likely to experience home price gains in the 20 to 30 percent range over the next five years. Active markets like Miami, Las Vegas and Phoenix could go up as much as 50 percent in that time period.
Although the negative news-bearers continue to report what seems to be the overdone and worn-out stories of declining prices, there definitely appears to be a new day dawning.
