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Search the San Diego MLS(includes all areas in San Diego County)
May 22, 2009
Projecting the Bottom for Falling Property Values
Realtors in many areas around the country are bidding higher than sellers' asking prices and coming up short. Sellers are successfully creating bidding wars to drive up prices which are at or near all-time lows. This is especially common in the Southern California area, where many listed homes are getting in excess of 100 bids. Is this indicative that prices in Southern California have hit bottom? Not hardly. Despite the savage bidding wars, prices are still far below their peak during the last housing boom. Values in the Los Angeles area fell more than 30% in 2008, and should fall even more. Taking into account the historical balances of income, housing sales, employment rate, foreclosures, and vacancy rates, L.A. area property values should fall another 30%. Apparently, we have yet to see the best real estate deals.
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To determine the metropolitan areas which are furthest from home prices reaching a turning point, each area's unemployment statistics, housing data, credit availability, and spending power are analyzed for the past 27 years. Predictions are ascertained using the areas' current rate of price decline, employment statistics, salary decline, and absorption rate to determine how long it will take each area to return to a state of balance. After making all these calculations, we find that the news is by far the worst for the state of Florida.
Miami, Orlando, and Jacksonville have experienced drops in home prices of 31%, 26%, and 8%, respectively; and projections are that they will see further drops of 54%, 49%, and 40%. All three cities are suffering ten-year high unemployment rates. In addition, they all have very low housing affordability issues. The median price for a home in Miami is $234,000, six times the area's median income of just over $39,000, earning Miami the distinction of one of the least affordable housing markets in the US. Low-affordability markets are historically hard-hit when unemployment rises. Miami's unemployment has been rising progressively since 2007. As unemployment rises, home prices tend to go the other way. The five metro areas furthest from the projected bottom for home prices are : Miami, Orlando, and Jacksonville, with the projected bottom coming in June of 2011; followed by Jacksonville in December, 2010 and Los Angeles in March, 2010.
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