Dragging or Moving? Or Both?
Reader Susan commented,, asking a two-part question:
When you say “drag on for another 2-3 years minimum,” do you mean that it will take that long for foreclosure/shortsale inventory to clear out? Or do you mean it will take that long for prices to return to what they would be by now if the bubble had never happened?
I mean that it will take that long for the foreclosure/shortsale inventory to clear out – and maybe longer if banks and servicers feel the need to moderate the flow.
Prices aren’t being affected much around here by foreclosures and short sales:
1. There aren’t enough of them.
2. Those that do hit the open market, sell for retail price like everything else.
The “dragging on” of short sales refers to the fraud and abuse being perpetrated by realtors on the community. If every short sale was exposed to the open market for all buyers to entertain, we’d have more inventory, and higher prices. Instead, we have realtors making off-market deals with friends at below-market pricing and raking in double commissions.
If nothing is done, we’ll survive, but it will drag on – buyers get discouraged and the lower comps throttle any pricing momentum. Thankfully, most of the NSDCC transactions are being sold by long-time residents/sellers with ample equity.
Second part of question:
I have a condo that sold in 2002 for $129,000. In a normal market, it would be worth about $190,000 by now. Can I expect that in 2-3 years it will be?
Normal market? It sounds like normal to you means 4% to 5% per year appreciation. If you are around NSDCC, you might be there already, or close. If not coastal but still in San Diego, your value should be higher than $129,000 by now.
Those Fannie REO condos mentioned earlier that were being listed for at least 10% higher than comps have been selling – and getting multiple offers too. The lower-end is so hot that prices have to be rising quickly, so yes, 2-3 years from now you should be fine.
$190,000? Maybe, if you are figuring that you are already around $150,000 or so.