I was just in South Florida on business two weeks ago and I happened to meet some real estate salespeople who were almost too busy to talk to me. My impression was at least in this market, properties are moving again. Then I just read this comment from the National Association of Realtors yesterday:
NAR experts noted that “some of the hardest-hit areas of the country, including Florida and California, are showing consistent, solid gains in pending sales… as lower prices have helped draw buyers in increasing numbers.”
California and Florida in modern times have always seemed to lead the nation in trends. Part of that I think is because the types of people who end up moving to states like California are usually the more risky, or brazen, or both. I like what Will Rogers said about my ancestors. Rogers said that when all the disaffected families of Oklahoma headed West to California in the 1800’s, the collective I.Q.’s of both states went up.
That may or may not be true, but I do consider California and Florida our “early adopter” states that seem to be historically sound predictors specifically of our real estate markets. And right now, the latest numbers indicate things are starting to rebound again in these two coastal communities. And in my experience, once California starts to bounce back, the rest of the nation isn’t far behind.
Growing up in Southern California, I witnessed a number of “corrections” in that volatile market- including the end of the feeding frenzy in 1990, when prices in the Los Angeles area fell by more than 25%. I can remember after flipping a fixer-upper in Granada Hills, using the profit as a downpayment to buy a nice 4 bedroom, 3 bath ranch house with a pool, for my family in Woodland HIlls, a suburb to the West of L.A., for $260,000. That was in the Fall of 1987. Less than 10 months later, due to some health issues, I had to put the home on the market. The very day I hammered the sign into the front lawn, I had two Brokers fighting to buy this home I had barely moved in, bidding each other up on my driveway. I finally stopped the absurdity and accepted an offer for $310,000.
I really loved that home, and hated to sell. It was only God’s grace that I put it on the market when I did, because about a year and a half later, I drove by that house in Woodland Hills, after the “crash” had hit the country, and the Southern California real estate market. The Broker who “won” the right to by my dream home less than 2 years before, and who paid me $310,000, was trying to sell. The sign on the front lawn said “Reduced Again! Owner-Broker motivated!” The price was listed as $230,000. That represented almost exactly a 25% price drop.
Would it surprise you to learn that less than 4 years later, that same home was again listed for sale by a different owner, at a bargain $379,000? One of the leading newspapers in that area had a headline in June of 1994 that summed it up best:
“June Home Sales Best in 5 Years. Up 25%”
Let me summarize how fast things moved, both down, and up, in Southern California during that crunch:
1987 – Housing soaring. Prices skyrocketing.
1989 – Prices peaking at all time highs. Market showing signs of weakness.
1991- Housing correction sees prices drop at least 25%.
1993- Prices rebounded.
1994 – Record year. New pricing highs. (Again!)
It basically took two years to drop by more than 25%. Then it two years on average to recover back to neutral. Then only 2 more years elapsed, till prices were up by an additional 25%, again!
The California Association of Realtors and DataQuick tell us that the housing peak in Los Angeles was probably around February of 2007, while in San Diego it was earlier, around May of ’06. Since then, in those markets median prices have dropped from peaks of $616,230 and $622,380, respectively, to new lows of $396,560 and $434,857. Let me save you the time, and do the math for you. We’re talking about “corrections” of over 35%.
But the good news is, history and the current data out of NAR suggest that we have already pretty much had our two years of misery in these two markets!
If I lived in California or Florida today, I’d seriously be starting to think that the buying opportunities are now. Because if history is our guide, these two states only take two years to get the “correction” out of their systems.
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About The Author: Tom Davidson is the acting Director of Sales & Operations for Express Schools, LLC. Since 1996 the companies under this banner have offered online real estate licensing and insurance licensing courses as well as online real estate exam prep and insurance exam prep.