FireDream

The Housing Market is Moving Towards Recovery!

Interesting news is coming out of California these days: home sales are beginning to increase.  According to a Bloomberg article, the Golden State may have found the bottom of the market and is now moving towards a form of recovery.

Here’s the deal: Calfornia led the way for a number of years in terms of exponential home price increases.  People were buying and flipping houses left and right.  Soon even tiny (as in 1000 square feet) homes in some areas of Los Angeles, San Francisco and other areas were selling or upwards of $1 million-a cost per squre foot unheard of in most of the U.S.

In December of 2005, the market peaked and home values began to fall.  Those who bought homes at the top of the market anticipating rapid equity growth and a quick flip were stuck with houses that they couldn’t afford.  Waves of defaults and foreclosures soon followed until, according to the Bloomberg article, almost $1.3 trillion of homeowner equity was lost.

What has happened, while certainly devastating to some families, was not only to be expected-it was needed.  The market corrected itself-as it must, and the home prices that Californians are now seeing are more in line with actual values.  No housing market can sustain that kind of growth forever and anyone who believes otherwise is nuts.

What’s more, California has been on this rollercoaster ride more than once before.  Look at the early 1980s when, as reported in the Bloomberg article, home sales dropped by more than 60%.  Or in the 1990s when they also tumbled.  And the people who took advantage of reduced home prices in those years benefited big time when prices began to climb.  And people who buy homes now have the chance to be in a perfect place to make a profit as the market rebounds in the next year, five years or ten years.

This blog is intended for informational/entertainment purposes only and is not meant to provide any financial or legal advice.