In some areas, foreclosures are increasing, housing inventories are higher than normal, and even well-qualified borrowers cannot receive mortgage loans. Many homeowners and home buyers also are becoming increasingly concerned about when the housing market will reach bottom. Although some areas, such as the Inland Empire and the Central Valley, appear to already have experienced the bulk of their price declines, other markets, such as the San Francisco Bay Area and Southern California may still see home values decrease further, according to some analysts.
• Some economists are comparing the current real estate cycle to the 1990s but the origin of this cycle is different from that of the last decade. During the 1990s, a higher rate of unemployment and many other economic factors triggered the downturn, contributing to weak sales for a five-year period. The current real estate market is different in that sales declined at a quicker pace during 2006 and 2007, but have shown marked improvement in 2008. In July home sales remained above the 400,000 level for the third consecutive month.
• Although home prices in California appear to be high compared with incomes, the current cycle has allowed home prices in California to become realigned with incomes. Affordability increased dramatically in the second quarter of this year, and is currently at 48 percent, meaning that nearly half of the state’s households can afford to purchase an entry-level home in California. • Some economists predict that the housing market will have several “false starts,” meaning that there may be periods when home prices reach a plateau, or may even increase for a brief period, and then decrease again. Although home prices have not yet stabilized, home sales are increasing. It also is important to note that real estate is cyclical and prices will eventually rebound, correcting the current market.
