California Properties Overvalued By 40%
According to Andrew Blackman of Bloomberg:
Californian homes are overvalued by as much as 40 percent and stricter lending standards will probably contribute to “material” price declines, according to analysts at Goldman Sachs.
Prices in the state “have proven surprisingly resilient, given the severe curtailment of credit availability and rising unemployment,” the analysts said in a note to investors. “However, we believe that a downturn is imminent.”
In August, the median price for houses in California was $589,000, though economic conditions only support prices of $350,000 to $380,000, the analysts said. The average U.S. home is 13 percent to 14 percent overvalued, the report estimated.
For the past 2 and half years, I’ve been harping on about how over-priced California real estate is and how the National Association of Realtors is completely clueless about real estate cycles, valuations and trends. Here’s a funny video about David Lereah who wrote a book “Are you missing the real estate boom” right at the peak of the cycle in 2005. Lereah is Chief Economist of NAR. (Hey, maybe I should apply for that job!)
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October 29th, 2007 at 7:06 pm
I wonder how the fires in San Diego and up into the Malibu area will affect home prices. Contrary to the news protrayal of the fires, celebrities wern’t the only ones losing their homes. Suddenly there is less supply, insurance will step in and rebuild a number of homes (if not all). In the short term what do you think will happen?
October 29th, 2007 at 9:59 pm
I just blogged about it last week – I think the short-term benefits are positive for the local SD economy.
Net loss for the national economy, but coupled with the rate cut (yes, I believe is on the Fed cutting rates again atleast once before christmas) it should prop up the housing market for an extra year.
but long term, the housing market is going down big time! Back in 2005, I spoke to Robert Campbell of http://realestatetiming.com/. He said the market would drop 35% and I said he was too optimistic and it would probably drop 45%.
Even my CPA thinks the market has further to drop.