The most recent figures showed a 1.1% price decline for real estate prices in March (Zillow), and that 21% of all mortgages in LA are under water – the borrower owes more than the house is worth. Until prices bottom, we are not going to see an end to defaults and foreclosures. Inventories will remain high, especially in places like Utah, Vegas, Arizona, Florida, and anywhere else where builders overbuilt. Every market is unique, so price declines from current levels on a local basis will depend on the characteristics of that local market. In Santa Barbara, we didn’t overbuild because there is no supply of new land that hasn’t already been built. This somewhat shields us from the oversupply issue. We have a bigger problem however, in that prices spiked so much that we have more room to fall, both on a percentage basis as well as a dollar basis.
Still more pain to follow!