So your telling me to go Short on Southern Cali? Done.

Yesterday, I attended an all day seminar about short sales in Southern California. It was hosted by the California Association of Realtors (C.A.R.). I was joined by a good portion of Southern California’s Redfin super team(Sara Masey, Anna Nevares, and Angela Creech). CAR’s representatives carefully elaborated on the state of the economy as a whole, then dissected California, and finally discussed their take on the local market here in So Cal.

It is actually quite rare for so many Redfin members to be in one place at once, but this was considered a special day because of the number of short sales that have recently taken over the inventory here in Southern California. Of the 61 properties that I have sold for Redfin, 5 have been short sales and 4 have been non-judicial foreclosures (REOS, Lender Owned). Those 9 transactions have all come over the last 6 months. Keep in mind that I have written and represented over 32 other unsuccessful Short Sale/REO offers.

The first portion of the meeting was hosted by Dr. Kleinheinz he is the Deputy Chief Economist, I found it interesting that he compared the market’s environment to the volatility that occurred in housing in the late 70s and the recession of the early 90s. The numbers on this graph illustrate the changes year after year on the number of sales of existing detached homes in relation to the median price in California. He pointed out a 47% decline in the number of homes that are being sold in California and its outstretched effects. Truth be told, everything from construction, to financial services, Fortune 500 company lay offs, Washington Mutual Branch closings, escrow companies, title company closures, out of work insurance agents, jobless home inspectors, and appraisers are all the effects of the economy.

Which begs me to ask, how bad is it? Are we through the worst part of it, or is there more to come. Are we just at this beginning of this meltdown? Some analysts feel we are on our way out of the recession. They are encouraged by Fed’s stimulus plan, but have we not forgot about the second set of Adjustable Rate mortgages and Negative Amortized loans that are coming due in the next 2 years. Has it exploded? On average I speak to about 6 new clients a week, my discussions always center on whether this is a good time to buy or should they wait it out. I have always felt that if you can afford it, I mean really afford it then buy. On the contrary, it seems that my conclusion may have been short sighted. According to this chart, a little less than 50% of Californians could afford to buy real estate back in 2003. But the fact that buying a house seems affordable doesn’t necessarily mean really that those households can take on the responsibilities of owning real estate. A quick scan of the 90,000 short sale listings on Countrywide’s inventory list would lead one to believe that even though one can afford to buy a home on paper that is not a compelling reason to buy.

What happened?

Greed happened. Foreclosures and short sales happened, agents stopped selling, buyers stopped buying, banks stopped lending, people overextended themselves, and people did not realize that the ride was cyclical. Maybe, this is my stop.