Wednesday, October 17, 2007

Could prices fall 65% in the IE

Well Foreclosure expert Leo Nordine thinks so. Check out this post for the LA Times real estate blog. This is not the first time I've seen 65% either. Global Insight, a finacial think tank has also rated the IE as about 65% overvalued. Is it possible that we could see drops that big? I think in some limited areas we might but overall I doubt it. I think 50% is a more realistic number and I'm already finding some homes close to that already. So here's the post for the Times...

LA Land
Seeking widsom from the front lines of the foreclosure crisis, we paid a visit today to the Big Kahuna himself -- big wave surfer and foreclosure sales specialist Leo Nordine. His take on the market: it's bad. Really bad.

We began by asking his assessment of the current market in relation to the last big downturn. "Armageddon," he said. "This one's worse, especially in the Inland Empire."

What's different? In some cases, he said, "Banks and institutional lenders are just giving up. They're just renting out some houses (instead of trying to sell them). That didn't happen before."

Are foreclosed homes selling at all? "Any place where there were first-time buyers is dead. South LA is dead. Anywhere prices are under $400,000 is really, really hard to sell right now."

He predicts prices will fall 65% in some areas of the Inland Empire, and sees the market hitting bottom in 2009. "There's one buyer, maybe, for every 20 houses for sale in Riverside," he said.

"We're not gonna bottom out until 2009 -- because they were doing so many crappy loans in 2006 -- even until March of '07. It'll be a while before those loans start defaulting. I hope I'm wrong. But I'm not wrong."

In a declining market, it makes sense to get a house on the market as soon as possible. For that reason, banks often speed the foreclosure process by paying defaulting homeowners cash to vacate the house -- "cash for keys." The going rate is $1,500, but in a sign of how quickly the market is deteriorating, some lenders are now paying up to $6,000, he said.


Anonymous said...

Have you looked at Vellano in Chino Hills. I drove through there last week and found weed filled empty lots. That place is going to be bad.

golfer_X said...

I don't get out to Chino Hills much. I did stop in a one development after playing Los Serrranos a few months ago. I laughed out loud when I saw the prices. The sales lady didn't seem nearly as amused as me;-)

ProblemWithCaring said...

Hey Golfer:

I recently wrote in my blog about how the prciing correction STILL isn't getting down to the average seller and buyer.

The news media keeps just enough junk on TV to keep even the most savvy uninformed. The result? A prolonged housing correction.

Anyway, the point is - those "in the know" are still laughing about prices in Chino Hills. The correction for first-time buyers interested in South or Mid LA, then, is a very LONG way aways.

golfer_X said...

Agreed, I stopped at some model homes in MoVal last Sunday and there were actually 3 or 4 groups of people walking around. I overheard some of the comments they were making and I was amazed. I heard, "Wow, these are quite reasonable considering they have Granite counters standard". Eh Hello, they started at $560k and you can go down the street and get and REO in the same tract for $350k. I overheard the agent talking to one group of older women. She was reading right from the big book of realtor speak. "it's a great time to buy", "hurry, we only have a few left" "interest rates are at historic lows", "real estate is your best investment". I heard all those and a few more. It was sure hard for me to bite my tongue.