Home sales fell in July much more than expected, rekindling worries about whether the housing market would crash and about the overall economy’s health. But, in my opinion, the 20%+ value decline in San Diego home values is well under way!
Sales of existing homes sank 4.1% to an annual rate of 6.33 million units, the National Association of Realtors reported. That’s below the 6.55 million units that economists had predicted and the lowest rate since January 2004. The rate is down 11.2% from a year ago.
The inventory of homes for sale surged 3.2% to 3.86 million units — about a 7.3-month supply. That’s the largest one-month rise in inventories ever and the highest supply since April 1993, CNBC’s Diana Olick reported.
David Lereah, the chief economist for the realtors group, said the inventory jump was the most worrisome part of the report. “I’ve never seen an increase like this — ever,” he told CNBC.
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Hi Bob:
Looks like you have beed ‘dead-on’ with your real estate market forecast!
I subscribe to your RSS feed and always look forward to your postings!
Keep it up!!
People who bought at a peak do stand a chance of losing some money if they are forced to sell. This could be forced by several things. First, lots of people took out ‘interest only’ loans. What this did was amortize the loan over 30 years. Interest only is due for a certain number of years defined in the note. Some people took a loan with a 5 year balloon. That means at the end of the 5th year, the entire principal is due. If the market stays bad for 5 years and the person can’t refinance then they stand a chance on defaulting on the loan.
I don’t think anyone deliberately bought at the ‘peak’. People were hoping that the market would continue to skyrocket but it didn’t. Have faith though, the real estate market like everything else runs in cycles. Personally, I don’t see this cycle lasting too long and I think by next year the market will improve.
Another problem that was created was the use of Adjustable Rate Mortgages. Some of the ARM’s I’ve seen have ridiculous terms and could allow the interest rate to go over 12% in a short time period. If a recession should occur and the interest rates skyrocket, these people could find themselves unable to make their monthly payment and they too could default on the loan.
It’s just surprising that so many people with the clear signs that were present in 2004 and 2005 didn’t say that the San Diego real estate bubble was about to bust
Andrew
TJ Mexico Dentist
I remember in 2005 that It seemed every month the paper reported that real estate sales were down by double digits though the values seem to be holding up. You would think an intelligent person would realize sales cannot drop by such a magnitude without values following.
Brianne
Oakland California Attorneys