The New Market

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How to Profit From the Upcoming
California Foreclosure Market

November 2006
This Month we have seen an amazing increase in luxury home values, raising by 1.9% from the second quarter of 2006, but year over yeaar increases have continued their steady decline. You can see throughout all luxury communites that there is a predominant buyers market. The buyers are stepping up, but they are still waiting to see how low the prices will go. If these luxury properties are priced right, there are multiple offers being made, but there is still a large inventory of property owners hoping to make big profit based on previous years sales information. Those properties are not moving very fast. The market appears to hot in the coastal communities of Del Mar, La Jolla, Encinitas. You can get some good deals in this area as speculators begin to flee the area hoping their million dollar investments don't drop in value before they can unload them. At this point I would start looking over the foreclosure information and do some research on short sales and how to make a good offer. The foreclosure market continues to heat up, and if you time it properly, there will be lots of money to be made!

August 2006
Driving around doing real estate appraisals this morning I was listening to AM radio and heard a little show about how California will be experiencing negative appreciation in some areas over the next 5-6 years. This is exactly what I have been hearing, but the rate is always up for discussion. Proffessor Thornberg of UCLA. I have found some information about him at the UCLA Anderson Forecast

There still seems to be a number of people that think that the market will level out over the next year and we will begin to see average appreciation rates between 3-9% annually. I imagine that might be possible in some areas, but in the areas that experienced record rates of appreciation over the past few years are going to get hit the hardest. In the opinion of Professor Thornberg, he thinks appreciation can drop up to 2% a year over the next 6 years then will start to creep back up. Bruce Norris of the Norris Group believes that appreciation drops will be more severe and I tend to believe that some areas will continue to see much higher decreases in appreciation. You can already see the numbers in DataQuick on our home page that there have been very severe drops on sales recorded over the past year. You have to make sure the figures are statistically relevant, and with such low number of sales in some zip codes, it is hard to determine what the actual depreciation rates are. Some areas with over 33 sales show double digit drops in appreciation and Condo properties seem to be getting hit the hardest.

Here comes the foreclosures

Now comes the foreclosure market. Over the next few years we will see these foreclosures creep up due to overspending, increasing interest rates, converting interest only loans and other factors.

Over the past few years everyone thought they were an expert in Real Estate, and that they knew what properties to purchase, how to fix them up and quickly sell them for a profit. Some people did really well and increased their wealth quite a bit. With the new wealth, they started spending more and more, possibly buying more properties to invest in as well. I still get people calling me to help them find properties to purchase and flip for a quick profit. I don't advise this to anyone at this point. Sure, you can work really hard, find some fixers, get them for a steal and still make a profit. But those are for the professional real estate investors that know about the California Market. The others continue to build up massive debt to retain the lifestyle they have developed with their new wealth and drive up more debt.

Converting interest only loans coming soon

For those that have not refinanced their interest only loans, better get on it immediately! If you still can... I would visit eForeclosure Prevention if you are in this situation.

A lot of properties that were purchased at the top of the market can't get refinanced without the owner bringing a lot of cash into the refinance transaction because their house just is not worth as much as it was a year ago when they purchased it. Once these interest only loans start to convert and mortgage payments shoot through the roof, many owners will only have the option to foreclose. Real estate investors will start to enter the market over the next couple years to help prior to foreclosure and also to take advantage of other foreclosure related transactions. Foreclosure.com is a good resource to look in to.


For those that were banking on selling their real estate for a huge profit over the next few years, or that have over extended their credit might have a little more to worry about. If you have not already converted your interest only mortgage to a loan package. I suggest you contact your mortgage company today.


If you would like more information on a home appraisal or to find a really honest mortgage company. Please visit San Diego Appraisals.

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