What to Expect in 2008

I wish I could say more of the same (as bad as that was)...but I am afraid it will continue to worsen.

The macro issues facing the broader Real Estate Market continue to worsen:

1) Lending standards continue to tighten, pushing up to 50% of potential Buyers out of the market.

2) Consumer sentiment towards Real Estate continues to decrease, moving many qualified Buyers who, in a normal market, would ordinarily buy to the sidelines.

3) Banks will be Sellers this year...and aggressive Sellers they will be.

Local factors influencing the Happy Valley market include:

1) Inventory of 3 years at current sales levels.

2) Recent closed transactions and the Auction of Beuna Vista homes will provide a new round of comparables that Appraisers MUST use to value property...meaning the amount banks will lend against Happy Valley homes WILL be coming DOWN. I have personally witnessed a very large increase in appraisal reviews by the banks.

3) Very large number of Toxic mortgages resetting this year. The loan to value ratio on most of these mortgages is above 100%. That means that a large number will have to be short-sales or foreclosures. Many homeowners will just chose to walk instead of making escalating payments against a depreciating asset.

4) The very abrupt end to in-flow Buyers from California.

Summary:

I fully expect prices in Happy Valley to continue downward and re-approach 2004 levels. The Spring Selling Season should see a flood of new listings hitting the market, but Buyers will sit on the sidelines and truly dictate the terms of the transactions. As we overshot on the upswing, we will undershoot on the way back down. I fully expect final Seller capitulation by the 4th quarter of 2008 and a bottom in prices the first half of 2009.