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...
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.