Headlines across the state continue to warn of “soaring” Default Notices and “cooling” market trends for much of California. Any reader of the paper may look at just this headline and not read into the article to find what it is actually saying:
1) Last quarter 20,752 notices of default were reported in California, but let’s remember that is WELL BELOW the historical average is 32,762.
2)In 1996, when Notices of Default hit an all time high of 59,897, homes were actually APPRECIATING!!!
Comparing and contrasting today’s market with that of the market in the early 90’s then almost becomes a pointless exercise. The appreciation experienced over the last several years does not mirror that which led to the fall in the 90’s nor does the state of the National economy mirror what we have now. The 90’s saw a recession, a loss of jobs and nation adjusting to becoming the only Super Power in the World. Today we see ourselves as still the sole superpower, but with many nations at our heels hoping to emulate what we have accomplished. Our economy is strong and job growth has been great for at least the last 3 years. With job growth, comes a need for housing, demand for housng will decrease supply and thus increase demand and we start to see steady appreciation once again.
As one last point of contrast between the depreciaton period of the nineties and the cooling depreciation we are seeing now is that during that period bonds were on a steady downward slope (see http://finance.yahoo.com/q/bc?s=%5ETNX&t=my for a graph of bond rates since 1960) Where as now, we are seeing a steady upward slope. We have two different trends here that to compare them as the same would be to compare apples to oranges.
Too much information can be a bad thing especially when it is not thoroughly analyzed, but rather just conveyed as being fact. Rates may come down or they may go up, the key to any interested buyer is the NOW and what you can do now. If you can get into a home now in a state that has seen nothing but historic appreciation my advice is to ride with the wave, not against it.
Tim Fiero and Assoicates