In the Wall Street Journal article posted on September 8 “Home Price Increases Depend on Foreclosure Sales” the author describes a condition that we are well aware of in the East Bay.
The question I am asked most often is “How much lower will prices go?”. This is a great question with no easy answer. In the article the author supplies statistics regarding different regions of the country who have a higher percentage of foreclosures and the fact that in these areas price declines are higher than those with a low percentage of foreclosures. I have posted a video blog “Selling Homes in 2009″ regarding this very topic and what I have come to understand is that most people who don’t need to sell aren’t, and most of the listings are coming from short sales, foreclosures, and transfers. Because we have seen a dramatic drop in foreclosure listings we have seen available inventory levels drop to as little as 2 weeks in some areas. So the key to where prices are going is the strategy the bank will employ for their foreclosure inventory. If they decide to slowly put homes on the market, I believe that prices will stay flat or begin an upward movement. If they place a large inventory of homes on the market I feel that prices will head down until the foreclosure inventory is sold.
