It is still seems a bad time to buy. I don't know much about housing value in other states but am following closely the price trend in Inland Empire as well as LA county.
Home prices in Inland Empire cities such as Fontana, Riverside, Corona, Rialto and Rancho Cucamonga have dropped about 30% from their peaks, in general terms. But if you look the the price of the same house, it is around 2003-2004 price range. Many of those houses are still unreasonably high. Sellers just don't want to admit their houses are not worth that much. In my opinion, we are going to see around 50% home price drop from peak in 2007(for south land) before price can stabilize.   

If you move westward other cities like Upland, Claremont, La Vern, San Dimas, Glendora, Azusa, Covina, Monrovia, Arcadia, San Gabriel, Temple City, Alhambra, Rosemead and Monterey Park, house price does not drop too much, probably around 5 to 10%. Until the affluent area like Arcadia, Altadena and  Pasadena  and etc. see a drop of close to 30% or greater in price, we are still have a long way to go. Not to mention west of LA.

Many reports, either paper or internet, always exaggerate the price drop to XX%. One thing these reports do not stress is the unrealistic peak value they compare to. A 100k house can be worth 100M or 1Billion as long as it is not sold. The real worth of a house is how much it is sold, not how much the similar house sold three months ago down the street. 

 My feeling is the price drop has not completed its course yet in LA area. It will have to go back to 2000 level before stabilizing. The sooner the price stabilizes, the sooner economy will rebound. Recent Congress and Senate actions will just prolong the downward trend and make it worse that it should be. If renters see little incentive to rent rather than owning a house, they will start buying. Only thing that keeps renters from buying is the house price. 

The sooner we get to the level that average renters' income can afford a house mortgage, the earlier the economy will stabilize.

Just my .02 cents.

Brandon,

Thanks for the chart. It is sobering to realize that we've just gotten through one wave (subprime) and are heading into several more waves of risky loans. Of course, the difference now is that lenders and government entities are aware of these coming waves and are bracing for them. For example you see Bank of America adopting a massive, systematic loan modification program. And you see states passing laws, like California's SB 1137, aimed at giving homeowners a better chance of getting a loan workout rather than a foreclosure.

Depending on how far the lenders and government are willing to bend backwards for bad loans and irresponsible homebuyers, we could see a mitigating effect from all these efforts.

Steve,

We see some moderation in the numbers in that the year-over-year percentage increase in defaults and auction notices is beginning to slow -- it's still increasing, just not as much.

The problem is that much of that moderation could be because of out-of-the-ordinary intervention on the part of lenders as well as the government. And that intervention could just be damming up another coming flood of foreclosures or it could actually be having a lasting impact and helping folks stay in their homes for the long term. So we're in a bit of limbo right now in terms of projecting where the trend is headed.

Daren,
    I'm just glad to find out my opinion is within reasonable range predicted by a professional. I don't do research or number crunching. All I have is the real life incidents around me or my friends.

Our economy is in deep trouble now. Part of it, if not all, is caused by overpriced houses. Now, everyone is lack of confident with the country's economy, and we can point the culprit to the dropping house prices. If the house price were to drop, why not let it drop faster and bottom out sooner. When home prices are attractive to renters, remember there are about 30 percent of U.S. households who live in rental properties, these renters will jump in and start buying.

Of course, the other 30 percent of current homeowners will feel the pain financially. Worst case scenario, the existing homeowners become renters again. And, current renters will become a new wave of homeowners. These new homeowners, many of them, have saved for many years waiting for this day to come. So they are more likely to qualify for a loan and likely to stick with it. I'm not saying current homeowners are all speculators. It is just that they are unlucky to buy their houses in the wrong time. When buying activities increase, the economy will be revitalized, if not flourish.

The end result of this event is the transfer of home ownership from a group 30 percent  to another group of 30 percent — homeowners become renters and renters become homeowner.

What we gain is the confidence that we have been hungry for to jump start the economy. I believe the new homeowners will be more responsible than the current homeowners because their mortgages are more affordable, as a result of lower house price, and they have been saving for so long to come to a better financial position.

We sold our DC home at a great financial loss. The buyers got a heck of a deal and bled us dry for everything they could knowing what type of market they were in. We had to do it, sadly, because of our elderly parents in need of assistance — so we moved to South Florida. We would like to purchase a home in Weston (Broward County), however, the market there is even worse. Everywhere you look it seems every other house is in foreclosure and the prices for home listings are still "wishful dreams" of their sellers (as the woman from California stated). We tried to do the right thing but are personally a bit peeved because we worked hard, paid our bills, and bit the bullet and sold in a downward market and now people who are in foreclosure or defaulting because they took out big loans they couldn't afford and pay for, who bought Hummers, boats, and luxury items with second mortgages are now to be forgiven with the banks; getting their balances lowered to market values and lower interest rates to fit into their budget. Wow!!! I guess we should have saved our money and just walked away from our loan.  

I totally agree with the comments made on the Los Angeles area.

We live in north San Diego and we see a lot of “short sales” and foreclosed properties in some neighborhoods (e.g. Oceanside) but far less in other areas (e.g. Carlsbad).

We don’t have a problem getting a loan, but the main issue we are facing now as a buyer is that prices are still too high, despite the large drops from their peaks. Many banks and owners are still not willing to lower their prices. Understandably, they don’t want to take their losses and perhaps are waiting for additional bailout from the government

With the upcoming severe economic downturn, why would anyone buy now at these high prices?

Daren,

I'm a big fan of your foreclosure research. Your charts are awesome and much appreciated.

J Javier

I believe prices will continue to fall, along with the stock market. Prices in most areas will drop on average another 20 percent and the Dow Jones Industrial will drop another 6,000 points.

Dean

I think housing prices will keep dropping until they are three times the average income. There has been a lot of discussion on how much prices went up and when, but no discussion on income increase — a traditional bench mark of house size. We sold in 2005 when we realized we could not buy in our neighborhood nor could any of our neighbors. We are still renting for approximately $500 less a month than a mortgage payment would be on a similar house in the same neighborhood with 20 percent down. We don't pay for maintenance. We probably won't buy again until it's a little more cost effective.

Melissa

As a Realtor, I saw this coming and sold my own home last year for a nice profit. I moved into my rental property and will qualify for a tax-free sale next year.

Those of you who have owned a home for four or more years are probably sitting on ample equity (profit). If you have to or wish to move, consider selling for a tax-free profit and buying your next home at a significantly reduced price.

I'm looking for another home in which to invest the cash from my sale. I'm glad I didn't put it in the stock market!  

I believe prices still have a way to go down, and I'll be ready to buy when I see better values in my area — maybe in 2009, but more likely in 2010.

Remember the old real estate adage, "locationX3" and follow (1) the price trend in your local area — metro region, county or city), (2) "days on market" statistic and (3) supply/demand ratio (inventory in months). They will indicate when we hit bottom and the rebound is starting.  

Rich

Another important note: The Case-Schiller Index tracks only 20 major metro areas, most of which "bubbled" far more than the rest of the nation. It's skewed with the most volatile cities, while real estate market changes have been much less across the U.S.  

The index was created as a Wall Street hedge fund tool so "Schiller" is a very appropriate name. Consult your local MLS Realtors for more accurate numbers and trends.  

We are on the front lines in your town, and we know what is really happening with home buyers and sellers. Despite the negative headlines, buyers are still looking for houses, getting mortgages, closing and moving in.  "The glass is half full," but the media headlines merely focus on "half empty!"    

We have a local contractor who has overbuilt and now is being pressured by the banks for their money. I recently offered 25 percent below their already reduced asking price. I’m still waiting for word from the lender who holds the construction loan. If they are smart they will accept my offer. If not, I'll walk away. Be patient and stand my ground. People need to sell much worse than you need to buy.

As Warren Buffet says: “Be fearful when people are greedy, be greedy when people are fearful.”

Now is a great time to buy if you plan to hold for 5 plus years, maybe longer. Prices may drop further but interest rates could rise. I'm from Washington state.

Steve

We live in the San Francisco peninsula area. We just purchased a home in Palo Alto. We have been looking for one year. Multiple offers still are going on in this area. There are longer days on market, but the prices are not "tanking" by any means. We decided we are going to live here for at least 7 years, so we decided to buy now. Historically, it all evens out. We realized we are still in a pretty healthy  market.  

Kaitlyn

What about prices for vacant lots or land. Will we see a continual decline in prices here too?

Randy

We are in escrow on a short sale and it's supposed to close next week. Although we feel sorry for those who are losing their homes, for us, this market is a great deal!  We are a young family in the California Bay Area, and for years, no matter how we've scrimped and saved and taken care of our credit rating, it's been impossible to achieve our dream of owning our own home. While everyone around us was buying in 2003-2007, we knew that a zero percent down and interest-only loans were a dumb move. I don't care if prices don't go up until 2020, because we are buying the house of our dreams (Well, our more modest dreams, I admit) for only $325,000. We decided to hurry up and act, because the government keeps talking about helping homeowners stay in their homes, and if they find a way to do that, we could be scrimping and saving for a lot longer.

Mel

We hope to buy in 2009 sometime, but the right property and at the right interest rate and the 'right everything' that we want, must be in place.  At least that's our outlook and plans. Wish us luck!

Parfie

Daren,

It would be greatly appreciated if you could send/direct me the link to where you obtained the foreclosure data? I'm trying to substantiate the trends by obtaining actual numbers. Thanks very much.